A Chance for Change
by Frank Fulton
Originally published in Glass Canada Magazine, October 2015 Issue
You may recall that in the June 2015 issue we discussed the press release from the Ontario Ministry of the Attorney General where the law firm of Borden Ladner Gervais LLP had been appointed to conduct an expert review of the Construction Lien Act. Their review had been scheduled to be completed by the end of 2015 but that is now looking unlikely.
Reviewers are looking at changing the amount of holdback from the current 10 per cent. They will consider increasing the number of dates for the release or early release of holdback such as on phased projects. Release of holdback may be made mandatory or automatic after expiration of lien rights, unless there has been early release of holdback. There’s a possibility of eliminating holdback for finishing work and the introduction of mandatory holdback trust accounts or a mandatory project bank accounts. The review will try to align the time limitations in the act with payment time periods in the Ontario construction industry, considering the causes of payment delays and how they can be addressed in the act or other legislation. Reviewers will consider the potential effect of prompt payment provisions on the principle of freedom of contract and on industry lenders and sureties. All this must be considered across the wide range of possible contract types.
Recommending an alternative dispute resolution mechanism is a possible outcome, pending consideration of the effectiveness of available procedures and remedies. This could include introducing an adjudication mechanism for construction disputes, mandatory mediation of lien actions, and/or an arbitration mechanism for construction disputes. Dispute review boards could be recommended for certain types of projects.
The review will consider whether “pay-when-paid” and/or “paid-if-paid” clauses should be made unenforceable. Owners, contractors and subcontractors could be given rights to access proof of financing as a result of this review. The review could recommend labour and material payment bond sureties to promptly pay undisputed amounts. It could recommend labour and material payment bond payees to complete their subcontracts if that’s in the best interests of the project. Mandatory labour and material payment bonding of all public projects and the electronic delivery of surety bonds will be looked at. And it will discuss whether changes to the third-party beneficiary rule are appropriate in order to enable payment by owners directly to subcontractors and suppliers.
Other issues include the Canada Revenue Agency’s super priority, the regulating of bidder exclusion provisions, lien rights related to delays, the potential for abuse of lien rights, mandatory certification of subcontract completion and the effectiveness of existing trust provisions.
The Ontario Glass and Metal Association determined the best way for our industry to be heard was to partner with other trades and interested parties to give us a much louder collective voice. We did this by joining Prompt Payment Ontario (PPO), a sole-purpose alliance of 42 contractor associations, unions, suppliers, general contractors and pension trust funds who have an interest in seeing prompt payment legislation enacted in Ontario. Our goal is to persuade the Ontario government that legislation is needed to ensure that money flows as it is intended down through the contractor supply chain.
PPO is one of the stakeholder groups that will make a submission of arguments to the CLA review team. In order to present meaningful. statistically viable data in their submission, PPO has issued a survey to collect the opinions of companies across the province. To have your say in changing the laws that affect your business, I urge you to go to PPO’s website at ontariopromptpayment.com and complete the survey. I also encourage you to join the OGMA who represents and presents your interests to PPO keeps you updated on the issues.
Frank Fulton is president of Fultech Fenestration Consulting. He has been in the industry for 30 years and can be reached via email at firstname.lastname@example.org