You Bet Your Glass – Prompt payment past due
By Frank Fulton
Justice past due
By Frank Fulton
Being sophisticated and therefore a dedicated reader of You Bet Your Glass, you’re undoubtedly aware of what has been transpiring with the Construction Lien Act (CLA) in Ontario over the past four years through my updates, whining and rants on the subject. For those of you who are new, here’s a brief refresher.
Bill 69, the Prompt Payment Act 2014, was introduced into the Ontario Parliament in May, 2013, got as far as second reading, received insurmountable kickback from developers and municipalities and was canned in April, 2014.
In March, 2014, the Ministry of the Attorney General of Ontario (AGO) committed to conduct a thorough review of the CLA and in February, 2015, the AGO announced they had appointed Bruce Reynolds as counsel to conduct the review.
In April, 2016, following an unprecedented degree of review and consultation with stakeholders across the entire construction sector, Reynolds and Sharon Vogel presented the AGO with their report and recommendations entitled “Striking the Balance: Expert Review of Ontario’s Construction Lien Act.”
Based on those recommendations, in May, 2017, Bill 142 entitled the Construction Lien Amendment Act, 2017, received first reading in the Ontario parliament. Finally, following numerous debates and clause-by-clause dissection by the Standing Committee of the Legislative Assembly, in December 2017 the act received third reading and was carried by a unanimous 87 to zero vote, receiving royal assent a week later.
As a member of the architectural glass and glazing community in Canada, the passing of this Act should be viewed as a good start and lend encouragement that at a fair and equitable playing field will someday be achievable. We’re not there yet. There are a lot of devils in the details of this act that will have to play out before we can determine if meaningful prompt payment terms are achieved.
The Ontario Glass and Metal Association filed a brief with the Standing Committee recommending that they revise two of these devils, namely:
“6.2 (1) Proper invoices shall be given to an owner on a monthly basis, unless the contract provides otherwise.” Basically, this gives an owner or contractor the right to circumvent the prompt payment monthly requirement simply by writing their contract to include longer invoice submission schedules.
“13.19 (3) Subject to subsection (4), if an amount is not paid when it is due under this section, interest shall be paid on the oustanding balance at the prejudgment interest rate determined under subsection 127 (2) of the Courts of Justice Act …”. This prescribed rate is only 0.8 per cent. This clause will act as incentive for an owner or contractor to drag out their payments, pay you the puny interest and save having to use bank financing at around six per cent. You’ll be the party requiring high-cost financing.
Our petitions were not acted on and the Act was completed with the devilish details intact. We’ll raise them again when the Act comes up for review in five years, hopefully with the backing of Prompt Payment Ontario.
It’s encouraging that prompt payment is gaining traction across Canada. In May, 2017, the Senate of Canada passed Bill S-224, the Canada Prompt Payment Act, that applies to construction contracts involving government institutions. Payment terms have also been discussed in provincial parliaments throughout the country for a number of years now. Hopefully the passing of Ontario’s legislation will serve as a guide and a catalyst to have fair payment terms established nationwide.