We are now only a few months away from the release of a comprehensive report examining the effectiveness of Ontario’s Construction Lien Act (the “Act”).
On March 28, 2014, the Ontario government announced an independent analysis of the current construction lien regime, with a view to address a wide array of concerns – including promoting prompt payment and an analysis of the effectiveness of existing dispute resolution mechanisms under the Act. The aim is to modernize the Act to promote better efficiency and effectiveness.
The Review was announced following the demise of Bill 69, the Prompt Payment Act, 2013, which was a private member’s bill that received first and second reading in the Ontario Legislature in May 2013.
In February 2015, the Ministry of the Attorney General and the Ministry of Economic Development, Employment and Infrastructure retained Bruce Reynolds as Counsel to the Review. Initially, the Review’s mandate was to deliver a report prior to December 31, 2015, but that has now been extended until March 31, 2016.
The Review has now completed the process of stakeholder consultation meetings and advisory group meetings. In doing so, the Review heard from hundreds of people representing more than sixty stakeholders.
The Review’s website has recently been updated to include all stakeholders’ written submissions; summaries of the meetings with stakeholders; the names of the members of the Review’s Advisory Panel; and a list of 26 additional issues that were identified through the consultation process.
Those involved in the construction industry have long complained that the existing Act does not adequately protect contractors, subcontractors, or suppliers from payment delays.
Many stakeholders, such as Prompt Payment Ontario (“PPO”), have advocated that a common framework be developed to establish progress and milestone payments to contractors. That could include a requirement that progress payments to contractors be made monthly, provided that milestones are achieved. PPO has also advocated for a deemed right of a contractor to suspend work, or to terminate a contract for nonpayment.
For those of us who have been involved in construction litigation, our experience tells us that litigation to secure payment can be a costly and drawn-out process. Unfortunately, those delays can prove fatal to smaller contractors, subcontractors, or suppliers. Efficiencies must be found.
Across Ontario, there is a lack of consistency in terms of how quickly the courts are able to deal with construction lien matters. In Toronto there is a daily process, every morning, whereby security can be posted and liens vacated. In Ottawa, by contrast, lawyers must demonstrate urgency and seek to have their client’s matter added to an existing motion list when seeking to vacate a construction lien. This can lead to unnecessary adjournments, costs and delays for clients – and construction projects.
In its submissions to the Review, The Advocates Society (an organization of lawyers which, among other things, makes submissions to the government on behalf its members) has recommended that this requirement for “urgency” be removed and that a procedure be put in place to bring a motion to vacate a lien without delay.
The Advocates Society has recommended that a requirement to attend at an early, mandatory, mediation included in the Act, which would hopefully result in more cost effective settlements and speedier resolutions of claims.
Other stakeholders, such as PPO, have advocated for the right of either party to a construction contract to refer the dispute to commercial arbitration as opposed to proceeding through the court process. There are both merits and drawbacks for proceeding to commercial arbitration as opposed to traditional court proceedings, and that subject will be canvassed in a future blog.
The results of the Review are not yet known, but any progress made towards breaking the construction lien gridlock will surely be seen as a welcome change by stakeholders in the construction industry. The lawyers at Nelligan O’Brien Payne await the results with eager anticipation.
[This article was originally published on February 22, 2016 in Ottawa Business Journal]