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4th Session, 41st Legislature

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Bill 245

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

INTERPRETATION AND APPLICATION

Definitions

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

"agreement" means a contract or subcontract. (« accord »)

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

"milestone" means the point in time provided for in an agreement for the submission of a payment application when a specified portion of the work is complete. (« étape »)

"modification" means a modification to an agreement that

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

(b) increases or decreases the obligations under the agreement;

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

(d) varies the schedule for performing the obligations under the agreement. (« modification »)

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

"payment application" means a request for payment made by delivering a proper invoice. (« demande de paiement »)

"payment bond" means a bond held as security for the payment of certain classes of persons performing labour or services, or providing materials, under an agreement. (« cautionnement de paiement »)

"payment certifier" means

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

(b) if no such person is identified in the agreement, 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 an agreement. (« payeur »)

"performance bond" means a bond given by a person to guarantee the performance of an agreement by that person. (« cautionnement d'exécution »)

"prescribed" means prescribed by regulation.

"proper invoice" means a written invoice, bill or other request for payment for work performed under an agreement that contains the following information and meets any other requirements specified in the agreement under which it is submitted:

(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 »)

"regulation" means a regulation under this Act. (« règlement »)

"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 the provision of any service or the supply of any materials under an agreement. (« travaux »)

Terms used in Builders' Liens Act

1(2)        In this Act, "construction", "contract", "contractor", "holdback", "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.

Crown bound

3           The Crown is bound by this Act.

Act does not apply to prior contracts

4           This Act does not apply to

(a) a contract made before the day this Act comes into force; or

(b) a subcontract made under a contract to which clause (a) applies.

Holdbacks under Builders' Liens Act

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

Act does not apply to P3 contracts

6(1)        This Act does not apply to a contract in respect of a public-private partnership if all parties to the contract are participants in the partnership.

Application to subcontracts with P3 participants

6(2)        For certainty, subsection (1) does not exclude the application of this Act to a subcontract entered into by a participant in a public-private partnership. For the purpose of applying this Act to such a subcontract concerning a public-private partnership,

(a) the participant is considered to be an owner; and

(b) the subcontract between the participant and the subcontractor is considered to be a contract between an owner and a contractor.

Contracts to conform

7           Every agreement is deemed to be amended insofar as is necessary to conform with this Act.

Restrictions on making payment applications

8(1)        A provision in an agreement that prohibits the making of a payment application without the prior approval of the owner or certification of the payment certifier is of no force or effect.

Exception re testing or commissioning

8(2)        Subsection (1) does not apply to a provision in an agreement that requires work to be tested or commissioned before a payment application may be made.

No contracting out

9(1)        Subject to subsection (2), no person may contract out of or waive any of the rights, obligations or remedies provided for under this Act.

Retaining amount payable as performance security

9(2)        If, as a condition of entering into an agreement, a payor requires a payee to provide a performance bond and the payee is unable or unwilling to provide a bond that is satisfactory to the payor, the payor and the payee may agree, in writing, to allow the payor to retain an amount otherwise payable under this Act as a performance security, in lieu of a performance bond, for work to be performed under an agreement until that work is completed.

PART 2

OBLIGATIONS TO PAY CONTRACTORS AND SUBCONTRACTORS

PAYMENTS TO CONTRACTORS

Progress payments

10(1)       Unless a contract provides for milestone payments, an owner must make progress payments to a contractor for work performed under the contract on a monthly basis or at shorter intervals provided for in the contract.

Monthly payments

10(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

10(3)       The owner must pay the contractor no later than 20 days after the contractor's payment application is approved or certified, or is deemed to be approved or certified under section 19.

Final payment — date specified

11(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 earlier of

(a) the date specified in the contract; or

(b) 20 days after the contractor's payment application is approved or certified, or is deemed to be approved or certified under section 19.

Final payment — no date specified

11(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 and the owner must pay the contractor no later than 20 days after the contractor's final payment application is approved or certified, or is deemed to be approved or certified under section 19.

PAYMENTS TO SUBCONTRACTORS

Progress payments

12(1)       Unless a subcontract provides for milestone payments, 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

12(2)       If no date for progress payments is provided for in the subcontract, the subcontractor must submit a monthly payment application no later than

(a) 5 days before the end of the month if the subcontract is with a contractor; or

(b) 10 days before the end of the month if the subcontract is with a subcontractor.

Payment to subcontractor

12(3)       The contractor must pay the subcontractor or the subcontractor must pay its subcontractor no later than the earlier of

(a) 7 days after the payor receives payment for the work that is subject to the payment application; or

(b) 27 days after the subcontractor's payment application is approved or certified, or is deemed to be approved or certified under section 19.

Final payment — date specified

13(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 earlier of

(a) the date specified in the subcontract; or

(b) 27 days after the subcontractor's final payment application is approved or certified, or is deemed to be approved or certified under section 19.

Final payment — no date specified

13(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 and the contractor or other subcontractor must pay the subcontractor no later than the earlier of

(a) 7 days after the contractor or other subcontractor receives payment for the work that is subject to the subcontractor's final payment application; or

(b) 27 days after the subcontractor's final payment application is approved or certified, or is deemed to be approved or certified under section 19.

AMOUNT OF PROGRESS PAYMENTS

Amount payable

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

(a) the amount specified under the agreement; or

(b) if the agreement 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

15          If a contract between an owner and a contractor provides for milestone payments, the owner must make a milestone payment to the contractor no later than 20 days after the contractor's milestone payment application is approved or certified, or is deemed to be approved or certified under section 19.

Payment — contractor and subcontractor

16          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 no later than the earlier of

(a) 7 days after the payor receives payment in respect of the work that is subject to the milestone payment application; or

(b) 27 days after the milestone payment application is approved or certified, or is deemed to be approved or certified under section 19.

Restriction on milestone payments in subcontracts

17(1)       Any term in a subcontract that requires milestone payments is without legal force or effect unless

(a) the contract between the owner and contractor under which the subcontract is made provides for milestone payments; and

(b) in respect of milestones relating to time periods, milestone payments are provided at intervals no less frequent than the intervals provided in the contract between the owner and the contractor.

Notice to subcontractor

17(2)        Before entering into a subcontract with a subcontractor, a contractor or subcontractor must provide written notice to the subcontractor of any milestone payment provisions under the subcontract.

Application

18          If an agreement provides for milestone payments as set out in sections 15 to 17, then sections 10 and 12 do not apply to that agreement.

DEEMED APPROVAL OF PAYMENT APPLICATION

Deemed approval or certification

19(1)       A payment application is deemed to be approved or certified by the payor or payment certifier 10 days after its receipt if submitted by a contractor, or 30 days 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

19(2)       The notice must set out

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

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

Dispute

19(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 agreement, an estimate of the loss, damage or cost;

(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.

If amount payable is disputed

19(4)       If the payor disputes any amount payable under a payment application,

(a) the payee must revise or reissue the proper invoice on which the application is based, without altering its date, to separately set out the disputed and undisputed amounts;

(b) the payor must pay the undisputed amount; and

(c) if the payee does not agree to the revision or to accept a revised amount in respect of the revision, the payor must pay any disputed amount if ordered to do so, and within the time required, by an adjudicator appointed under section 23.

RIGHT TO SUSPEND PERFORMANCE AND PAYMENT

Suspending work for failure to pay

20(1)       If a payor fails to make a payment in accordance with this Act, the payee may suspend the performance of work under the agreement 10 days after providing a written notice of default as follows:

(a) if the payee is a contractor, by providing the notice 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 providing the notice 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

20(2)       If a payee commences and diligently continues interim adjudication under section 23, 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

20(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

20(4)       A suspension of payment to those persons to whom the payee provided written notice does not constitute a breach of the agreement.

Interest

20(5)       A contractor or subcontractor whose payment obligation is suspended must pay interest in accordance with section 22 on the amount of the suspended payment that is agreed upon as owing or awarded by an adjudicator under section 23 starting from the date on which the payment would otherwise have been due.

Resumption

20(6)       When work resumes under an agreement 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.

CLAIMS FOR SETOFF

Claim for setoff

21(1)       A payor may retain an amount otherwise payable to a payee under a proper invoice as a setoff, but only if

(a) the setoff relates to a debt, claim or damages incurred or accrued in respect of the same contract or subcontract under which the invoice was issued; and

(b) the payor provides notice of the claim as required under subsection (2).

Timing and notice re claim for setoff

21(2)       A payor claiming a setoff against a proper invoice must, before the date the invoice would otherwise be payable under this Act, provide the payee with

(a) a written notice setting out the amount and the particulars of the claim for setoff; and

(b) any documentation on which the payor relies in support of its claim.

Interest

21(3)       A contractor or subcontractor retaining an amount under this section must pay interest in accordance with section 22 on the amount that is agreed upon as owing or is awarded by an adjudicator under section 23, starting from the date on which the payment would have been due if it had not been retained.

INTEREST ON OVERDUE PAYMENTS

Interest rate

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

(a) set out in the agreement; or

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

whichever is greater.

INTERIM ADJUDICATION

Referral

23(1)       A party to an agreement that is subject to this Act may refer a dispute respecting payments under this Act to interim adjudication in accordance with the regulations.

Appointment

23(2)       The adjudicator is to be appointed in accordance with the regulations.

Decision of adjudicator

23(3)       Subject to subsection (4), a decision of the adjudicator is binding on the parties to the agreement and may be registered in the court and enforced as if it were an order of the court.

Authority of court, arbitrator or arbitral tribunal

23(4)       The referral of a matter to interim adjudication under this section, and any resulting decision of an adjudicator, does not affect the jurisdiction of the court, or of any arbitrator or arbitral tribunal that has authority to deal with the matter, to consider and make a determination in respect of the matter.

RIGHT TO TERMINATE CONTRACT FOR NON-PAYMENT

Termination

24(1)       A payee who is a contractor or a subcontractor may terminate the agreement for non-payment of amounts due to the payee in accordance with a decision of an adjudicator rendered under section 23.

Notice

24(2)       A payee who intends to terminate an agreement must provide written notice to the payor and to every subcontractor with whom the payee has a subcontract in relation to the payee's contract or subcontract with the payor.

Contents of notice

24(3)       The notice must state that if the payor does not make full payment of the outstanding amount determined by the adjudicator within 15 days, excluding Saturdays and holidays, after receipt of the notice, the payee may terminate the agreement.

Confirmation of termination

24(4)       To terminate an agreement under this section, a payee who provided notice under subsection (2) must confirm the termination in writing following the expiry of the notice period and provide the confirmation to any person entitled to receive notice under subsection (2) in the manner set out in section 26.

Effect of termination

24(5)       The termination of an agreement under this section does not constitute a breach of the agreement and does not affect any right of the payee to be paid under the agreement by the payor.

RIGHT TO INFORMATION

Request

25(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 any 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;

(c) a copy of any payment bond or performance bond posted by a contractor or subcontractor that relates to work included in the subcontract;

(d) a copy of any certificate of substantial performance provided by the owner or a payment certifier in respect of the contract to which the subcontract relates.

Payment

25(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.

Damages

25(3)       If the payor does not provide the information in accordance with subsection (1) or the notice in accordance with subsection (2), or knowingly or negligently misstates the required information, the payor is liable to the payee for any resulting damages.

Court order

25(4)       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.

GIVING NOTICES

Method of giving notice

26(1)       When, under this Act or the regulations, notice of anything is required or authorized to be given to any person, the notice must be in writing and the person required or authorized to give it must do so

(a) by serving the notice personally on the person being given the notice;

(b) by mailing or delivering the notice to that person at his or her address last known to the person giving the notice, using a mail or delivery service that provides the person giving the notice with an acknowledgment of receipt;

(c) if the person has provided the sender with an e-mail address for the delivery of notices under this Act and the regulations, by sending it to that e-mail address; or

(d) in accordance with a method specified by regulation.

Evidence of receipt by registered mail

26(2)       Evidence that a notice has been given under this Act or the regulations in accordance with the method described in clause (1)(b) and that the sender has received an acknowledgment of its receipt is proof, in the absence of evidence to the contrary, that the notice has been received by the person to whom it is addressed.

Evidence of receipt by e-mail

26(3)       Subject to subsection (4), evidence that a notice has been given under this Act or the regulations in accordance with the method described in clause (1)(c) is proof, in the absence of evidence to the contrary, that the notice has been received by the person to whom it is addressed seven days after the day the notice was sent.

E-mail notice not received

26(4)       A notice given in accordance with the method described in clause (1)(c) is considered not to have been received by the person to whom it was addressed if

(a) sending the notice triggers an automated response indicating that the notice is not deliverable; or

(b) before the notice was sent, the person has notified the sender in writing that the e-mail address may no longer be used for such notices.

REGULATIONS

Regulations

27          The Lieutenant Governor in Council may make regulations

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

(b) defining the term "public-private partnership" for the purpose of section 6;

(c) respecting interim adjudication under section 23, 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 interim adjudication, including the adjudicator's fees and expenses, and the portion of the fees and expenses that each party must pay;

(d) respecting the method of giving any notice, including additional electronic methods, for the purpose of clause 26(1)(d) and specifying the time at which such a notice is presumed to have been given;

(e) 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

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

Coming into force

29          This Act comes into force on a day to be fixed by proclamation.

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.