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Reforming the New Brunswick’s Mechanics’ Lien Act: Prompt Payment and Expedited Dispute Resolution
The New Brunswick Legislative Services Branch is considering recommending changes to the Mechanics’ Lien Act(1973), the main Construction Law statute in the Province. The Mechanics’ Lien Act has long been considered outdated and in need of modernization. Many other Provinces in Canada, including Nova Scotia and Ontario, have recently updated, or are considering updating, their construction law legislation to be more responsive to modern construction law issues.
Two of the major changes being considered are the addition of a prompt payment scheme and an expedited dispute resolution scheme.
Prompt payment provisions are intended to ensure that contractors, subcontractors and sub-subcontractors are paid quickly for their work after they issue an invoice. Rather than leaving payment terms to be dealt with in contracts, strict terms and deadlines for payment would be set out in the Mechanics’ Lien Act (or a new Act that replaces it) that would apply to all construction projects.
A prompt payment scheme has received royal assent in Ontario, along with other amendments to the Ontario Construction Lien Act. While the majority of changes to the Ontario Act came into force on July 1, 2018, the prompt payment scheme does not come into force until October 1, 2019, to give the construction industry sufficient lead time to prepare for this significant change.
The New Brunswick Legislative Services Branch is interested in implementing a similar prompt payment scheme to the one adopted in Ontario. The Ontario prompt payment scheme includes the following provisions:
- Payment by an owner is triggered upon delivery of a “proper invoice” by a contractor.
- After receiving an invoice, an owner is required to pay the contractor within twenty-eight days.
- An owner who disputes an invoice may issue a notice of non-payment within fourteen days of receiving a proper invoice.
- If an owner does not issue a notice of non-payment to a contractor, the contractor is required to pay all relevant subcontractors within seven days of receiving payment from the owner.
- If an owner issues a notice of non-payment to a contractor, the contractor is still required to pay all relevant subcontractors within thirty-five days of delivering the proper invoice to the owner.
- A contractor who is not paid by the owner can issue a notice of non-payment to its subcontractors. The contractor must then refer the dispute with the owner to adjudication within 21 days of giving the notice to their subcontractors.
- A subcontractor is required to pay all relevant sub-subcontractors within seven days of receiving payment from a contractor.
The Legislative Services Branch believes a prompt payment scheme would work well in New Brunswick. Similar to Ontario, it anticipates giving sufficient lead time to allow stakeholders to prepare for any new laws which may come into effect. While no prompt payment provisions have been approved by the New Brunswick Legislature yet, the Legislative Services Branch has expressed strong interest in bringing these changes to New Brunswick.
Expedited Dispute Resolution
Most jurisdictions that have adopted prompt payment schemes have also enacted provisions for expedited dispute resolution. These two sets of provisions tend to go hand-in-hand, as prompt payment does not work unless disputes over payment can be resolved quickly and inexpensively, without having to resort to complex court litigation.
Expedited dispute resolution schemes use non-judge adjudicators to hear cases quickly and efficiently. Adjudicators tend to be people with significant experience in the construction industry, and can include other professionals such as accountants, architects, engineers, surveyors, project managers, and lawyers.
New Brunswick’s Law Reform Note #41 focuses on the adjudication system enacted in Ontario’s Construction Lien Act,which contains the following provisions:
- A party may begin the adjudication process by submitting a notice of adjudication to the other party at any time during a construction project, for a variety of disputes, including payment, valuation of services or materials, and holdback disputes.
- Parties may choose an adjudicator from a registered list or be assigned one by a designated provincial authority.
- After an adjudicator is selected, the party who issued the notice must submit all documents on which it plans to rely within five days.
- Adjudicators must render their determinations within thirty days of receiving all required documentation.
- All determinations made by an adjudicator are binding. Judicial review of adjudication decisions is only available if leave is granted by the Court.
The Legislative Services Branch has expressed some concern that Ontario’s scheme might not function well in New Brunswick, as there may not be a large pool of adjudicators to draw from. Manitoba has considered a similar problem, and has thought about expanding its Small Claims Court system to address this issue. However, the NB Legislative Services Branch is not convinced that sending construction disputes to Small Claims Court would lead to time-efficient results. Therefore, the NB Legislative Services Branch is currently awaiting further feedback on this issue.
The Legislative Services Branch collected written feedback on Law Reform Note #41 from all interested stakeholders until July 15, 2018.
For more information on the prompt payment scheme and the expedited dispute resolution scheme, please see Law Reform Note #41, available at the following link: Law Reform Note #41