When payments are delayed in a construction project, the effects can be felt throughout the entire project. To address these issues, Saskatchewan introduced prompt payment legislation through amendments to The Builders’ Lien Act, 1992, SS 1984-85-86, c B-7.1 [BLA] which came into force on March 1, 2022. The Saskatchewan Construction Dispute Resolution Office (“SCDRO”) handles disputes regarding prompt payment.
The BLA establishes mandatory timelines for payment on construction projects and creates a fast-track adjudication process to resolve payment disputes. Its purpose is to ensure that money continues to flow down through the construction chain, by providing a timely mechanism to address certain disputes such as the non-payment of an invoice or the valuation of services.
Although Saskatchewan's prompt payment regime has been in place since 2022, adjudications have recently gained traction. This is due in part to the BLA's transitional provisions, which rendered the adjudication process unavailable for contracts entered into before the amendments came into force on March 1, 2022.
As participants in the construction industry gain familiarity with prompt payment requirements and the adjudication process, disputes that may have previously stalled construction projects or proceeded through traditional litigation or arbitration may now being referred to adjudication through the SCDRO.
How Does Prompt Payment Work?
The prompt payment regime is triggered when a contractor delivers a "proper invoice" to the owner. A proper invoice must contain specific information as prescribed by the legislation.
Once a proper invoice has been received, the owner must either:
- pay the invoice; or
- deliver a Notice of Non-Payment.
Owners can no longer withhold payment of an entire invoice simply because part of the invoice is disputed. Amounts that are not in dispute must still be paid within the prescribed timelines.
The BLA also requires contractors to promptly pass payments down the contractual chain. Once a contractor receives payment from the owner, amounts owing to subcontractors must be paid within seven days (unless the subcontractors’ entitlement is, similarly, formally disputed through the procedures in the BLA).
What Happens When There Is a Dispute?
Where a payment dispute arises with respect to a proper invoice, or one of the other prescribed grounds in the BLA, the BLA allows a party to that dispute to apply for adjudication. Adjudication is intended to be a streamlined, interim dispute resolution process that allows parties to obtain a determination quickly, without the time and expense often associated with traditional court proceedings or arbitration.
Where an owner, contractor, or subcontractor disputes payment, the matter may be referred to adjudication. This process is commenced by serving a Notice of Adjudication on the opposing party and filing the Notice with the SCDRO.
The process moves rapidly. After a Notice of Adjudication, strict timelines are imposed by the BLA, which governs each stage of the adjudication process. Owners and contractors should be aware of the stringent timelines that may be imposed on them.
An adjudicator has wide discretion to determine the dispute, including (but not limited to) the value of services or materials, payments subject to change orders, or other prescribed grounds as set out by the BLA. The resulting determination may be enforced through the Court of King's Bench.
This determination is not final and can be determined ultimately through the litigation or arbitration process.
Navigating Saskatchewan's Prompt Payment Regime
Prompt payment legislation has fundamentally changed how payment disputes are handled on Saskatchewan construction projects. Owners must be aware of the strict timelines for disputing invoices, while contractors and subcontractors should ensure that their invoices satisfy the statutory requirements and that they are prepared to act quickly when payment issues arise.
As the use of adjudication continues to increase, understanding your rights and obligations under the BLA is more important than ever. Whether you are an owner, contractor, or subcontractor, obtaining timely legal advice can help you protect your interests and navigate the prompt payment process effectively.
If you require assistance with a prompt payment adjudication or the requirements of prompt payment legislation, reach out to one of the members of our Construction Law practice group for advice on how to proceed.
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