On August 29, 2022, Alberta’s Builder’s Lien (Prompt Payment) Amendment Act, 2020 (the “Act”) will come into force and overhaul the Builder’s Lien Act (the “BLA”), with significant amendments and a renaming to “the Prompt Payment and Construction Lien Act”. On February 25, 2022, the Government of Alberta released the Prompt Payment and Adjudication Regulation (the “Regulation”), providing further clarification on how the Act will operate.
Transition from the BLA to the Act
Any contract or subcontract entered into prior to August 29, 2022 will continue to be governed by the BLA for 2 years.
Section 37 of the Regulation provides that contracts entered into before August 29, 2022, but are expected to remain in effect for more than 2 years after that date, must be amended to reflect their compliance with the Act and the Regulation. Parties will have 2 years from August 29, 2022 to amend their contracts accordingly.
Any contract or subcontract entered into after August 29, 2022 will be governed by the Act and the Regulation.
Meaning of Prompt Payment
As discussed in our previous article on the Act, the payment deadlines under the Act are triggered when an owner or contractor receives a proper invoice from a contractor or subcontractor. All contractors and subcontractors are required to provide a proper invoice at least every 31 days.
Section 3 of the Regulation now clarifies that within this 31 day period, the owner and contractor may agree to specific terms on when proper invoices are to be delivered.
The Adjudication Process
A party wishing to engage in the adjudication process under the Act must provide written notice to the opposing party and provide the same to the Nominating Authority on the same day. Section 20 of the Regulation sets out what the written notice must include, as follows:
- names and addresses of the parties in dispute;
- nature and brief description of the dispute;
- nature of the redress sought;
- name of the Nominating Authority to whom the party serving notice intends to submit the notice; and
- name of the adjudicator requested to oversee the adjudication, if any.
Under the Act, the Services Minister of Alberta will designate entities to act as a Nominating Authority. The Regulation stipulates that for an entity to be designated as a Nominating Authority, an entity must apply to the Minister in a time and manner specified by the Minister.
If appointed, section 7(1) of the Regulation empowers the Nominating Authority to issue certificates of qualification to adjudicate to an eligible individual who applies to act as an adjudicator.
Section 7(2) of the Regulation clarifies the qualifications required for an individual to be appointed as an adjudicator. An individual will be eligible to hold a certificate of qualification to adjudicate if the individual:
- has at least 10 years of relevant experience in the construction sector;
- has sufficient knowledge and experience in dispute resolution, contract law, legislative interpretation, determination writing, ethics, jurisdiction and the adjudication process;
- is not an undischarged bankrupt;
- has not been convicted of an indictable offence;
- pays the required fees, costs or charges for training and qualification; and
- agrees in writing to abide by the code of conduct.
If appointed, section 25(1) of the Regulation stipulates that an adjudicator may: (a) issue directions to parties involved in the adjudication; (b) obtain information through independent research; (c) conduct on-site inspections of the subjects that the adjudicator considers necessary; and (d) obtain assistance from construction industry professionals.
The adjudication process is expected to proceed quickly, and a decision will be rendered approximately 46 days from the commencement of adjudication, subject to any extensions. Section 25(3) of the Regulation allows the appointed adjudicator the power to extend, one or more times, any deadline in the adjudication process to a maximum of 10 calendar days.
Important timelines respecting adjudication include:
|Procedure||Days from service of notice under s. 20 of the Regulation|
|Parties to inform the Nominating Authority that they agree on a specific adjudicator||4 days|
|If parties cannot agree, the Nominating Authority to appoint a qualified adjudicator||11 days|
|Claimant to provide submissions||16 days, or in the alternative, 5 days from the appointment of an adjudicator if the parties agree, whichever is earlier|
|Respondent to provide submissions||28 days, or in the alternative, 12 days from the claimant providing submissions, whichever is earlier|
|Adjudicator to make a determination||46 days, or in the alternative, 30 days from the claimant providing submissions, whichever is earlier|
Matters Subject to Adjudication
The Regulation clarifies that a wide range of matters may be submitted to the binding adjudication process under the Act. Section 19 of the Regulation sets out that the following disputes may be subject to adjudication:
- valuation of services or materials provided under the contract or subcontract, including in respect of a written change order, whether approved or not, or a proposed changed order;
- payment under the contract or subcontract, including in respect of a written change order, whether approved or not, or a proposed change order;
- disputes that are the subject of a notice of non-payment under Part 3 of the Act;
- payment or non-payment of an amount retained as a major lien fund or minor lien fund and owed to a party during or at the end of a contract or subcontract; and
- any other matter in relation to the contract or subcontract that the parties in dispute agree to, regardless of whether or not a proper invoice was issued or the claim was lienable.
Section 33.6 of the Act also gives the adjudicator further powers with respect to matters brought to it for determination, including:
- an adjudicator may refer any matter to the court if the adjudicator does not have the jurisdiction to hear the matter or where, in the opinion of the adjudicator, the court is the more appropriate forum for hearing the matter (subsection 33.6(2)); and
- an adjudicator may refuse to hear a dispute if, in the opinion of the adjudicator, the dispute is frivolous or vexatious (subsection 33.6(3)).
Section 33.6(4) of the Act makes a determination of a matter by the adjudicator final and binding on the parties to the adjudication, subject to the judicial review process described in section 33.7 of the Act.
However, Alberta’s Red Tape Reduction Implementation Act, 2021 (“Bill 62”), which received Royal Assent on June 21, 2021, amends section 33.6(4) of the Act and provides that an adjudicator’s determination of a matter under the Act is binding unless:
- a court order is made in respect of the matter;
- a party applies for a judicial review of the decision under section 33.7 of the Act;
- the parties have entered into a written agreement to appoint an arbitrator under the Arbitration Act; or
- the parties have entered into a written agreement that resolves the matter.
This change aligns Alberta’ legislation with other jurisdictions that provide for an interim binding adjudication.
Section 33.7 of the Act covers a party’s ability to apply for judicial review of a determination made by an adjudicator under the Act and states “[a]n application for judicial review of a determination of an adjudicator may be made in accordance with this Part and the Alberta Rules of Court (AR 124/2010)”.
Further, under section 33.8 of the Act as amended by Bill 62, parties will have 30 days from the date of the notice of determination to file and serve an application for judicial review.
Section 34 of the Regulation provides the grounds upon which a party to adjudication may apply for judicial review, including where:
- the applicant party participated in the adjudication while under a legal incapacity;
- the contract or subcontract is invalid or has ceased to exist;
- the determination was of a matter not subject to adjudication;
- the process of adjudication did not follow the procedures to which the adjudication was subject and it subsequently caused prejudice for the applicant party;
- the adjudication was conducted by someone other than a duly qualified adjudicator;
- there was a reasonable apprehension of bias on the part of the adjudicator; and/or
- the determination was made as a result of fraud.
The Regulation provides further guidance on the new progressive holdback regime. Progressive release of holdbacks will be mandatory where: (a) the completion schedule is longer than a year or the contract stipulates that payments are to be made on a phased basis; or (b) the prescribed contract price exceeds $10 million CAD.
Where a contract does not stipulate a phased payment, an annual payment of partial holdbacks must be made.
Builder’s Lien Registration
Under section 36 of the Regulation, the 90 day period for registering liens on work and materials related to the production and provision of concrete will not apply to entities that install or use ready-mix concrete. The Act and Regulation adopt the definition of ready-mix concrete as provided in the North American Industry Classification System.
Architects and Engineers
Section 35 of the Regulation states that regulated professional architects and engineers will be subject to the Actwhere they are contracted in a consultative capacity respecting an improvement. Accordingly, architects and engineers may be subject to holdback requirements under the Act.
The Construction Law group at Whitelaw Twining will continue to advise and provide timely updates that will provide further clarity and guidance in the implementation of the Prompt Payment and Construction Lien Act, and as other jurisdictions, including British Columbia, consider implementing a similar scheme.