Ontario’s Construction Lien Act Review Moves to Next Phase
by IAN HARVEY Nov 6, 2015
With its information package distributed to the industry, the Ontario review of the Construction Lien Act (CLA) is in its consultative phase and has asked for an extension to complete the task of reporting to the government.
“We have something like 60 stakeholders with 30 deputations and we’re just finalizing the dates,” said lawyer Bruce Reynolds, senior partner at Borden Ladner Gervais (BLG) LLP, who is heading the expert review panel for the Ministry of the Attorney General.
“Some of the interested parties have asked for more time to complete some internal reviews to better present data to us. We have asked the client (the province of Ontario) for an extension past the original deadline which is Dec. 31 to March 31.”
Reynolds and Sharon Vogel, a partner in BLG’s Construction Law Group, started hearing presentations from the industry in mid-October and expect to wrap up by mid-December.
“There’s a broad array of issues in the information package and I think we’ll hear from someone on each of those points,” he said.
Participants range from unions to construction association and even the Ontario Bar Association’s Construction and Infrastructure Law group, which consists of lawyers like Reynolds who practice in the area.
The mandate of the review, commissioned February of this year, is to look at how both payments and the industry have evolved since inception of the CLA in 1983.
The information package spells out what has happened since then and what may be worthy of discussion, such as:
— Widespread adoption by contractors and major subcontractors of “pay when paid” and “pay if paid” provisions in their standard form subcontracts;
— The evolution of “prompt payment” or fairness of payment legislation in other common law jurisdictions, and the corresponding desire on the part of suppliers for similar rights to be adopted in Ontario; and
— The development and evolution of statutory adjudication and dispute review boards as a means of promptly resolving construction disputes internationally.
Certainly the issue of prompt payment is high on the list of some in the sector resulting in the creation of Prompt Payment Ontario (PPO) which formed to push it to the top of the agenda.
PPO recognizes there are other issues such as automatic release of holdbacks but it insists “every other jurisdiction on the planet has prompt payment legislation and we’re not looking for just some tinkering within the Lien Act, we want prompt payment legislation that spells it out. Canada is way behind in this. No province has prompt payment legislation.”
The review is partially the result of the fallout of the failure of Bill 69, the Ontario Prompt Payment Act, which died in committee when a general election was called for June 2014. There was disagreement in the construction sector over the benefits and wording of that legislation.
Large construction companies like EllisDon, for example, testified that Bill 69 as written would trigger more disputes and increase litigation and costs.
The Carpenters’ District Council, representing 22,000 members, however, was supportive saying the withholding of payments had become far too common while the MUSH sector (Municipalities, Universities, Schools and Hospitals) were adamantly opposed.
Lagging payments have a huge ripple effect across the sector, said Ron Johnson of the Interior Systems Contractors Association speaking for PPO. Rather than rely on anecdotal evidence, earlier this year, it sent out a questionnaire and now have more than 500 responses from contractors across Ontario.They were expected to present a summary of that data to Reynolds and the panel on Oct. 27.
“We’ve been working hard at putting forward the best case possible, the critical issue is to ensure contractors are paid within 30 days of the work being signed off as complete,” he said.
“Right now the average payment time our contractors are saying is somewhere between 70 and 80 days. That lag in payment is significant and has a negative impact across the construction industry chain.”
The Ontario General Contractors Association (OGCA) was expected to present to the review on Oct. 26.
“Our foundation points cover some of the major issues such timing and dispute resolution,” said Clive Thurston, OGCA president.
The panel and its support team will have to digest the presentations, distill the issues and then report back to the province. Other issues they may be considering include:
— The impact of Ontario’s planned $30 billion major infrastructure renewal program across transportation, including roadbuilding, and regional and municipal mass rail, LRT and subway transit;
— Where and how public-private partnerships fit in with any revamp of the CLA
— Procurement policies allowing government or municipal entities to exclude potential bidders solely on the basis that the potential bidder has previously brought legal proceedings against them;
— The impact of electronic record keeping and communications on construction projects, with large numbers of documents which have to be “managed” within a significant construction lien litigation; and
— The effect of current low interest rates which has cut bankruptcies in the construction sector and diminished the importance of a 10 per cent holdback.
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