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3rd Session, 41st Legislature

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Bill 218

THE PROMPT PAYMENTS IN THE CONSTRUCTION INDUSTRY ACT


Table of Contents Bilingual version (PDF) Explanatory Note

(Assented to                                         )

WHEREAS the construction industry accounts for approximately 8% of Manitoba employment and is a significant contributor to the economic stability of Manitoba;

AND WHEREAS most Manitoba construction contractors are small- and medium-sized companies with limited cash flow and limited access to credit;

AND WHEREAS delayed payments for construction work they have performed limits the ability of small- and medium-sized contractors to invest in their businesses and hire apprentices;

AND WHEREAS the enactment of prompt payment legislation will reduce or minimize the number of sometimes crippling slowdowns in construction projects caused by overuse of the builders' lien scheme in the absence of prompt payment legislation;

THEREFORE HER MAJESTY, by and with the advice and consent of the Legislative Assembly of Manitoba, enacts as follows:

PART 1

INTRODUCTORY PROVISIONS

Definitions

1(1)        The following definitions apply in this Act.

"court" means the Court of Queen's Bench of Manitoba. (« tribunal »)

"milestone" means the point in time provided for in a contract or subcontract for the submission of a payment application when a specified portion of the work is complete or a specified period of time is reached. (« étape »)

"modification" means a modification to a contract or subcontract that

(a) varies a price or its method of calculation;

(b) increases or decreases the obligations under the contract or subcontract;

(c) varies the method of performing the obligations under the contract or subcontract; or

(d) varies the schedule for performing the obligations under the contract or subcontract. (« modification »)

"payee" means a contractor or subcontractor entitled to receive payment under a contract or subcontract. (« bénéficiaire »)

"payment application" means a request for payment in the form of a proper invoice. (« demande de paiement »)

"payment certifier" means

(a) the person identified in a contract or subcontract as being responsible for certifying payment applications; or

(b) if no such person is identified in the contract or subcontract, a person agreed upon by the payor and payee to be the payment certifier. (« certificateur »)

"payor" means the owner or any contractor or subcontractor required to make payment under a contract or subcontract. (« payeur »)

"prescribed" means prescribed by regulation.

"proper invoice" means a written invoice, bill or other request for payment for work performed under a contract or subcontract, if it contains the following information and meets any other requirements specified in the contract or subcontract:

(a) the payee's name and address;

(b) the date of the proper invoice and the period during which the payee performed the work;

(c) information identifying the authority, whether in the contract, subcontract or otherwise, under which the work was performed;

(d) a description, including quantity where appropriate, of the work performed or the services or materials supplied;

(e) the amount payable for the work performed or the services or materials supplied, and the payment terms;

(f) the name, title, telephone number and mailing address of the person to whom payment is to be sent;

(g) any additional prescribed information. (« facture en bonne et due forme »)

"subcontract" and "subcontractor" have the same meaning as "sub-contract" and "sub-contractor" in subsection 1(1) of The Builders' Liens Act. (« contrat de sous-traitance » et « sous-traitant »)

"work" includes providing any service or supplying any materials under a contract or subcontract. (« travaux »)

Terms used in Builders' Liens Act

1(2)        In this Act, "construction", "contract", "contractor", "materials", "owner" and "services" have the same meaning as in subsection 1(1) of The Builders' Liens Act.

Purpose

2           The purpose of this Act is to strengthen the stability of the construction industry and lessen the financial risks faced by contractors and subcontractors by providing for timely payments to them under construction contracts and subcontracts.

Act does not apply to prior contracts

3           This Act does not apply to a contract or subcontract made before the day this Act comes into force.

Contracts to conform

4           Every contract and subcontract is deemed to be amended insofar as is necessary to conform with this Act.

No contracting out

5           No person may contract out of or waive any of the rights, obligations or remedies provided for under this Act.

PART 2

OBLIGATIONS TO PAY CONTRACTORS AND SUBCONTRACTORS

PAYMENTS TO CONTRACTORS

Progress payments

6(1)        An owner must make progress payments to a contractor for work performed on a monthly basis or at shorter intervals provided for in the contract.

Monthly payments

6(2)        If no date for progress payments is provided for in the contract, the contractor must submit to the owner or payment certifier, on or after the last day of the month, a monthly payment application that sets out a claim for the work performed in that month.

Payment to contractor

6(3)        The owner must pay the contractor on or before the 20th day after the approval or certification of the contractor's payment application.

Final payment — date specified

7(1)        If the contract specifies a date for final payment, the owner must make final payment to the contractor in respect of the work performed no later than the date specified in the contract or the 20th day after the approval or certification of the contractor's final payment application, whichever is earlier.

Final payment — no date specified

7(2)        If no date for final payment is specified in the contract, the contractor must submit to the owner or payment certifier, after completion of the work, a final payment application that sets out the final claim for work performed.

Final payment to contractor

7(3)        The owner must pay the contractor

(a) on or before the 5th day after the approval or certification of the contractor's final payment application; or

(b) on or before the 15th day after receipt of the final payment application if there is no payment certifier or if the payment certifier fails without sufficient cause to certify the final payment application within 10 days after receiving it.

PAYMENTS TO SUBCONTRACTORS

Progress payments

8(1)        A contractor and a subcontractor must make progress payments to a subcontractor for work performed on a monthly basis or at shorter intervals provided for in the subcontract.

Monthly payments

8(2)        If no date for progress payments is provided for in the subcontract, the subcontractor must submit to the contractor or other subcontractor, on or after the 25th day of the month, a monthly payment application that sets out a claim for the work performed by the subcontractor up to the 25th day of the month.

Payment to subcontractor

8(3)        The contractor must pay the subcontractor or the subcontractor must pay its subcontractor on or before the 25th day after the approval or certification of the subcontractor's payment application.

Final payment — date specified

9(1)        If the subcontract specifies a date for final payment, a contractor or subcontractor must make final payment to a subcontractor in respect of the work performed no later than the date specified in the subcontract or the 30th day after the approval or certification of the subcontractor's final payment application, whichever is earlier.

Final payment — no date specified

9(2)        If no date for final payment is specified in the subcontract, the subcontractor must submit to the contractor or other subcontractor, after completion of the work, a final payment application that sets out the final claim for work performed.

Final payment to subcontractor

9(3)        The contractor or subcontractor must pay the subcontractor

(a) on or before the 10th day after the approval or certification of the subcontractor's final payment application; or

(b) on or before the 30th day after receipt of the final payment application if there is no payment certifier or if the payment certifier fails without sufficient cause to certify the final payment application within 10 days after receiving it.

AMOUNT OF PROGRESS PAYMENTS

Amount

10          The amount of a progress payment to which a payee is entitled is

(a) the amount specified under the contract or subcontract; or

(b) if the contract or subcontract does not specify the amount for progress payments, the value of the work performed in the payment period, determined relative to the value of the entire contract or subcontract, including the value of all modifications.

MILESTONE PAYMENTS

Payment — owner to contractor

11          If a contract between an owner and a contractor provides for milestone payments, the owner must make a milestone payment to the contractor on or before the earlier of

(a) the 20th day after the achievement of the milestone; or

(b) the 10th day after the approval or certification of the contractor's milestone payment application.

Payment — contractor and subcontractor

12          If a subcontract between a contractor and a subcontractor or a subcontractor and another subcontractor provides for milestone payments, the payor must make a milestone payment to the payee on or before the earlier of

(a) the 30th day after the achievement of the milestone; or

(b) the 20th day after the approval or certification of the subcontractor's milestone payment application.

Terms — milestone payments

13(1)       Any term in a contract or subcontract in respect of a milestone payment between a contractor and a subcontractor or a subcontractor and another subcontractor is without legal force or effect unless

(a) the contract between the owner and contractor authorizes milestone payments; and

(b) in respect of milestones relating to time periods, milestone payments are provided at intervals no less frequent than the lesser of

(i) one month, and

(ii) the intervals provided in the contract between the owner and the contractor.

Notice to subcontractor

13(2        ) Before entering into a subcontract with a subcontractor, a contractor or subcontractor must provide written notice to the subcontractor of any milestone payments under the subcontract.

Application

14          If a contract or subcontract provides for milestone payments as set out in sections 11 to 13, then sections 6 and 8 do not apply to that contract or subcontract.

DEEMED APPROVAL OF PAYMENT APPLICATION

Deemed approval or certification

15(1)       A payment application is deemed approved or certified by the payor or payment certifier on the 10th day after its receipt if submitted by a contractor, or the 20th day after its receipt if submitted by a subcontractor, unless, before that time, the payor or payment certifier, in a written notice to the payee, disputes the amount in the payment application in whole or in part or requires a revision to the payment application.

Notice

15(2)       The notice must set out

(a) the reasons for the dispute or required revision, including any references to the relevant provisions of the contract or subcontract; and

(b) the amount of payment being disputed or in respect of which a revision is required.

Dispute

15(3)       The portion of a payment application in respect of which an amount is disputed or a revision is required is limited to the following:

(a) where the loss, damage or cost is recoverable under the contract or subcontract, an estimate of the loss, damage or cost of completion or correction of the work; and

(b) where the dispute of a payment application in whole or in part is limited to the value of a modification or its method of evaluation, an estimate of the portion of the value of the modification that is the subject of the disagreement.

Withholding amounts

15(4)       If a payor provides notice of a dispute or required revision,

(a) the payor may withhold from the payment only an amount related to the dispute or required revision; and

(b) the payor must make a payment in the amount set out in the payment application, minus any amount estimated under subsection (3).

RIGHT TO SUSPEND PERFORMANCE AND PAYMENT

Suspending work for failure to pay

16(1)       If a payor fails to make a payment in accordance with this Act, the payee may suspend performance of work under the contract or subcontract,

(a) if the payee is a contractor, by immediately providing written notice of default to the owner, and sending a copy of the notice to all subcontractors with whom the contractor has subcontracted for that portion of the work in respect of which the payor has failed to make the payment; or

(b) if the payee is a subcontractor, by immediately providing written notice of default to the payor, and sending a copy of the notice to the owner, the contractor, and all subcontractors with whom the subcontractor has subcontracted for that portion of the work in respect of which the payor has failed to make the payment.

Suspending payment

16(2)       If a payee commences and diligently continues adjudication under section 18, the payee may, by written notice to a subcontractor to whom the payee provided notice of default under subsection (1), suspend payment to the subcontractor of any amount the payee owes to the subcontractor for work done that is work for which the payor has failed to pay the payee.

Deadline for suspended payments

16(3)       If a payee complies with subsections (1) and (2), the deadline for payment by the payee is extended to the earlier of

(a) the day on which the default is corrected; or

(b) the day on which the default is resolved by settlement or by the decision of an adjudicator.

No breach

16(4)       A suspension of payment to those persons to whom the payee provided written notice does not constitute a breach of the contract or subcontract.

Interest

16(5)       A contractor or subcontractor whose payment obligation is suspended must pay interest in accordance with section 17 on the amount of the suspended payment starting from the date on which the payment would otherwise have been due.

Resumption

16(6)       When work resumes under a contract or subcontract following a suspension of work, the party resuming the work is entitled to the payment of resumption costs, in addition to any other amounts to which the party is entitled under the contract, subcontract or this Act.

INTEREST ON OVERDUE PAYMENTS

Interest rate

17          A payor must pay interest on any amount overdue at the rate

(a) set out in the contract or subcontract; or

(b) provided for prejudgment interest under section 79 of The Court of Queen's Bench Act;

whichever is greater.

DISPUTE RESOLUTION

Referral

18(1)       A party to a contract or subcontract may refer any dispute respecting payments under this Act to adjudication in accordance with this section and the regulations.

Appointment

18(2)       The adjudicator is to be appointed in accordance with the contract or subcontract or, if it does not provide for the appointment, with the agreement of the parties or in accordance with the regulations.

Decision

18(3)       A decision of the adjudicator is binding on the parties. A decision may be registered in the court and enforced as if it were an order of the court.

RIGHT TO TERMINATE CONTRACT FOR NON-PAYMENT

Termination

19(1)       A payee who is a contractor or a subcontractor may terminate the contract or subcontract for non-payment of amounts due to the payee in accordance with a decision of an adjudicator rendered under section 18.

Notice

19(2)       A payee who intends to terminate a contract or subcontract must provide written notice to the payor.

Contents of notice

19(3)       The notice must state that if the payor does not make full payment of the outstanding amount determined by the adjudicator within 14 days after receipt of the notice, the payee may terminate the contract or subcontract.

Termination

19(4)       The termination of a contract or subcontract under this section does not constitute a breach of the contract or subcontract and does not affect any right of the payee to be paid under the contract or subcontract by the payor.

RIGHT TO INFORMATION

Request

20(1)       A subcontractor may, by written notice at any time, require a payor with whom the subcontractor has entered into a subcontract to disclose without delay either or both of the following:

(a) the due dates for any progress payments and the final payment to the payor, relating to the work that is the subject of the subcontract;

(b) the payor's receipt of a payment related to work performed by the subcontractor.

Payment

20(2)       Immediately upon receiving a payment as described in clause (1)(b), a payor must provide notice to each payee who has requested disclosure under that clause of the date and amount of the payment received that relates to the work performed by the payee.

Notice

20(3)       The notice must be provided

(a) in writing;

(b) by posting it on a website controlled by the payor that is accessible to the payees; or

(c) in any other manner that will allow the payees access to the notice.

Damages

20(4)       If the payor does not provide the information in accordance with subsection (1) or the notice in accordance with subsections (2) and (3), or knowingly or negligently misstates the information required under subsection (1) or (2), the payor is liable to the payee for any resulting damages.

Court order

20(5)       Upon application by the payee, the court may, by order, require a payor to comply with this section, and may make any order as to costs that it considers appropriate.

MISCELLANEOUS PROVISIONS

Holdbacks under Builders' Liens Act

21          Any entitlement to receive payments under this Act is subject to the payor's obligation to retain holdbacks under The Builders' Liens Act.

Crown bound

22          The Crown is bound by this Act.

REGULATIONS

Regulations

23          The Lieutenant Governor in Council may make regulations

(a) prescribing any additional information to be contained in a proper invoice;

(b) respecting adjudication under section 18, including

(i) the establishment and maintenance of a roster of adjudicators and the selection of adjudicators from the roster for appointment in a dispute,

(ii) the appointment of a person to act as an adjudicator in a dispute, whether or not selected from a roster under subclause (i),

(iii) the process for adjudicating a dispute, including deadlines that must be met for specific stages in the process,

(iv) procedures that an adjudicator must follow, and

(v) fees and expenses payable by the parties in an adjudication, including the adjudicator's fees and expenses, and the portion of the fees and expenses that each party must pay;

(c) respecting any other matter that the Lieutenant Governor in Council considers necessary or advisable to carry out the purpose of this Act.

PART 3

C.C.S.M. REFERENCE AND COMING INTO FORCE

C.C.S.M. reference

24          This Act may be referred to as chapter P142 of the Continuing Consolidation of the Statutes of Manitoba.

Coming into force

25          This Act comes into force on the day it receives royal assent.

Explanatory Note

This Bill deals with payments to contractors and subcontractors in the construction industry.

Owners must make periodic payments under a construction contract to their contractors at specified times as the work progresses or when milestones are reached. They must also make final payments promptly upon work completion. Similar obligations apply to contractors' payments to their subcontractors, and subcontractors' payments to other subcontractors.

If payment obligations are not met, a contractor or subcontractor may, with notice, suspend work or terminate the contract. An adjudicator may be appointed to resolve payment disputes.