Bill 20: Prompt Payment Legislation Introduced in British Columbia

On October 7, the Government of British Columbia introduced Bill 20 in the B.C. legislature. Bill 20 implements long-anticipated reforms aimed at providing greater payment and cash-flow certainty for stakeholders in the construction industry. It proposes prompt payment legislation and abolishing Shimco liens, a problematic form of lien against holdback funds recently reaffirmed by the B.C. Court of Appeal.

Bill 20 proposes the new Construction Prompt Payment Act, which is based on similar legislation enacted recently in other Canadian jurisdictions. Key aspects of Bill 20 include:

1. New prompt payment rules
2. A formal adjudication process
3. Amendments to the Builders Lien Act, including abolishing the Shimco lien

Prompt Payment

New invoicing and payment requirements are likely to have the most significant day-to-day impact on construction industry participants.

Among other things, Bill 20 prescribes specific requirements for the submission of “proper invoices” by contractors, which are to be submitted monthly unless otherwise agreed. Once a “proper invoice” is submitted, the Bill then establishes a regime to facilitate prompt payment of contractors and subcontractors further down the contractual chain.

Bill 20 requires that an owner pay its contractor within 28 days after receiving the invoice. Contractors and subcontractors are required to pay their subcontractors by the earlier of seven days after receiving payment or the “calculated payment date,” which provides an additional seven days to pay for each step down the contractual chain. For example, a head contractor (in position “one” in the contractual chain) would have a calculated payment date of 35 days, while its subcontractors (in position “two” in the contractual chain) would have a calculated payment date of 42 days.

An owner may dispute an invoice by providing written notice of non-payment in the prescribed form within 14 days after the invoice date. For contractors or subcontractors, the notice period for non-payment is the earlier of seven days after they receive a notice of non-payment or the calculated payment date.

Adjudication of Disputes

Bill 20 also gives parties to a construction contract the option to refer certain disputes to a defined interim adjudication process, including disputes relating to:

1. Failure to give a proper invoice
2. Failure to make a required payment
3. A notice of non-payment
4. The valuation of services or materials supplied under a contract
5. Whether a payment is required under a contract, including in relation to a change order or proposed change order
6. Any other matter agreed to between the parties

An adjudication may not be commenced more than 90 days after the date a contract is completed. Where the dispute relates to a subcontractor, the 90-day timeline may begin running even earlier. An adjudication cannot be commenced more than 90 days after the earlier of the date the subcontract is certified as completed or the subcontractor last supplies services or materials.

The adjudication process is intended to be quick, with the adjudicator providing a written determination no more than 35 days after appointment unless otherwise agreed. A party required to pay an amount pursuant to a determination must do so within 15 days, failing which a party may suspend further work.

The adjudicator’s determinations are binding until finally determined by a court or in an arbitration, or by written agreement. They may be filed with the Supreme Court of British Columbia and have the same force and effect as a judgment of that Court. Other than an application for judicial review of a determination, nothing in Bill 20 restricts the authority of a court or tribunal to consider the merits of a dispute subject to adjudication or determined by an arbitrator.

Changes to the Builders Lien Act and Abolition of Shimco Liens

Bill 20 does not overhaul the basic framework of the Builders Lien Act. However, it does make the following notable adjustments:

1. The definition of an “improvement” in relation to which a claim of lien arises has been expanded to include demolition and removal work
2. The holdback period has been shortened from 55 days to 46 days, allowing the release of holdback funds immediately following expiry of the 45-day lien period
3. Where one or more claims of lien are filed within the holdback period, payment may now be made of the portion of the holdback greater than the total amount of those claims of lien

In addition, the proposed amendments expressly abolish the Shimco lien, a distinct lien against the holdback. The dual-lien structure created by Shimco liens had been the source of uncertainty for years and its abolition is likely to be welcomed by industry stakeholders.

Key Takeaways

If enacted, the changes contemplated by Bill 20 and the Construction Prompt Payment Act will have a significant impact on owners, contractors and subcontractors. Among other things:

1. Industry participants should understand their “contract position.” Clarity as to where a stakeholder falls in the contract chain is more important than ever, because it determines their calculated payment date.
2. Industry participants should be prepared for disputes, including those arising from disagreements related to change management, to be referred to adjudication. They should familiarize themselves with the relevant abbreviated timelines, procedure and enforcement mechanisms.
3. Industry participants releasing holdbacks can now do so more quickly and without the uncertainty created by Shimco liens.

For further information, please contact the authors or any other member of our Litigation & Dispute Resolution group.