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Bill 69                                                          2013

An Act respecting payments made under contracts and subcontracts in the construction industry

Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:

Part I
General

Definitions, Construction Lien Act

   1.  (1)  The terms used in this Act have the same meaning as in the Construction Lien Act, unless the context requires otherwise.

Same, regulations

   (2)  In this Act,

“regulations” means the regulations made under this Act.

Application

Act binds Crown

   2.  (1)  This Act binds the Crown.

Exemptions

   (2)  This Act does not apply to any contract or subcontract prescribed by the regulations.

Transition

   (3)  This Act does not apply to any contract or subcontract made before the day this Act came into force.

Contracts to conform

   3.  Every contract or subcontract related to an improvement is deemed to be amended in so far as is necessary to be in conformity with this Act.

Part II
Payments

Holdbacks under the Construction Lien Act

   4.  (1)  Any entitlement to receive payments under this Act is subject to the payer’s obligation to retain holdbacks under the Construction Lien Act.

Duty to pay holdbacks

   (2)  A payer shall pay the value of a holdback within one day after the day the payer is no longer required to retain the holdback under the Construction Lien Act.

No additional holdbacks

   (3)  A payer shall not withhold any payment other than those payments that the payer is permitted or required to withhold under this Act or under the Construction Lien Act.

Right to receive progress payments

   5.  Every contractor and subcontractor is entitled to be paid progress payments in accordance with the following:

    1.  If a contract or subcontract provides for progress payments that become payable at least every 31 days after the first day that services or materials are supplied to the improvement under the contract or subcontract, the payments shall be made in accordance with the contract or subcontract.

    2.  If a contract or subcontract does not provide for progress payments as described in paragraph 1, the payments shall be made in accordance with section 6.

Progress payments, default rules

Application

   6.  (1)  This section applies where a contract or subcontract does not provide for progress payments that become payable at least every 31 days after the first day that services or materials are supplied to the improvement under the contract or subcontract.

Payment period

   (2)  A payment period referred to in this section means the period of time that begins on the first day of every month and ends on the last day of that month.

Progress payment application

   (3)  A contractor or subcontractor shall prepare, in respect of every payment period, a progress payment application that sets out the value of the services and materials that have been or will be supplied to the improvement under the contract or subcontract during the payment period.

Estimates

   (4)  A progress payment application may rely on reasonable estimates.

Submission of application

   (5)  Progress payment applications shall be submitted in accordance with the following schedule:

    1.  A contractor shall submit a progress payment application to an owner on or after the last day of the payment period.

    2.  A subcontractor shall submit a progress payment application to a contractor before the last day of the payment period.

    3.  A subcontractor shall submit a progress payment application to another subcontractor within the time period prescribed by the regulations or, if no such time period is prescribed, within a reasonable period of time that would enable the other subcontractor to comply with this subsection.

Payments, timing

   (6)  A payer shall make a progress payment in accordance with the following schedule:

    1.  In the case of a payment to a contractor, within 20 days after the day the payee submits the progress payment application.

    2.  In the case of a payment to a subcontractor, by the day that is the later of,

            i.  10 days after the day a certificate is issued by a payment certifier in respect of the payment, if applicable, and

           ii.  30 days after the day the payee submits the progress payment application.

Right to suspend work or terminate contract

   7.  (1)  A payee may suspend work or terminate a contract or subcontract if the payee is not paid a progress payment that the payee is entitled to under this Act.

Same

   (2)  A suspension or termination shall be done,

  (a)  in accordance with the contract or subcontract; or

  (b)  if the contract or subcontract does not authorize such a suspension or termination or both, in accordance with section 8.

Suspension of work or termination of contract, default rules

   8.  (1)  This section applies where a contract or subcontract does not authorize a payee to suspend work or terminate the contract or subcontract if the payee is not paid a progress payment.

Same

   (2)  Where a payee has not been paid a progress payment, the payee may suspend work or terminate a contract or subcontract if,

  (a)  the payee provides the payer with written notice of the intention to suspend work or terminate the contract or subcontract if the payment is not made within seven days after the day the payee provides the notice;

  (b)  the payer has not made the payment within seven days; and

   (c)  the payee provides the payer with written notice of the suspension or termination.

Same

   (3)  If a payee has suspended work under subsection (2), the payee may terminate the contract or subcontract during or after that time if,

  (a)  the payee provides the payer with written notice of the intention to terminate the contract or subcontract if the payment is not made within seven days after the day the payee provides the notice;

  (b)  the payer has not made the payment within seven days; and

   (c)  the payee provides the payer with written notice of the termination.

Same, copy of notice to subcontractors

   (4)  A payee shall provide a copy of any written notice provided to a payer under subsection (2) or (3) to any subcontractor who supplies services or materials to the improvement under a subcontract with the payee.

Same, suspension by subcontractor

   (5)  A subcontractor who receives notice of a suspension under subsection (4) may suspend work if the subcontractor provides the payer with written notice of the suspension.

Same, termination by subcontractor

   (6)  A subcontractor who receives notice of a termination under subsection (4) may terminate the subcontract if the subcontractor provides the payer with written notice of the termination.

Demobilization and remobilization costs

   (7)  If a payee resumes work following a suspension, the payer shall pay the payee for any reasonable demobilization and remobilization costs incurred by the payee.

Right to pay when paid

   9.  (1)  This section applies where a payee has not been paid a progress payment and the payee has taken steps to suspend work, terminate the contract or subcontract, or enforce the payee’s lien rights.

Same

   (2)  Any obligation of the payee under this Act to make a payment by a specified date shall be extended and the payment shall become payable on the earliest of the following days:

    1.  The day on which the default on the payment is corrected.

    2.  The day on which the default on the payment is resolved by settlement or agreement.

    3.  The day on which a final determination of the payee’s lien rights is made, if applicable.

    4.  The day on which the payee’s lien rights expires.

Right to receive final payment

   10.  Every contractor and subcontractor is entitled to be paid a final payment in accordance with the following:

    1.  If a contract or subcontract provides for a final payment, the payment shall be made in accordance with the contract or subcontract.

    2.  If a contract or subcontract does not provide for a final payment, the payment shall be made in accordance with section 11.

Final payment, default rules

Application

   11.  (1)  This section applies where a contract or subcontract does not provide for a final payment.

Final payment application

   (2)  A contractor or subcontractor shall prepare a final payment application that sets out the outstanding amount owing under the contract or subcontract.

Submission of application

   (3)  Final payment applications shall be submitted in accordance with the following:

    1.  A contractor shall submit a final payment application on or after the date the contract is deemed to be completed and services or materials are deemed to be last supplied to the improvement under subsection 2 (3) of the Construction Lien Act.

    2.  A subcontractor shall submit a final payment application on or after the date on which the subcontractor last supplies services or materials to the improvement under the subcontract.

Payment, timing

   (4)  A payer shall make the final payment in accordance with the following schedule:

    1.  In the case of a payment to a contractor, the payment shall be made by the day that is,

            i.  five days after the day a certificate is issued by a payment certifier in respect of the payment, if applicable, and

           ii.  if payment is not dependant on such a certificate or if the certificate is not issued within 10 days of the contractor’s request to do so, 15 days after the day the payee submits the final payment application.

    2.  In the case of a payment to a subcontractor, the payment shall be made by the day that is the later of,

            i.  10 days after the day a certificate is issued by a payment certifier in respect of the payment, if applicable, and

           ii.  30 days after the day the payee submits the final payment application.

Approval of applications

   12.  (1)  A payment application is deemed to be approved 10 days after the day the payee submits the application, unless,

  (a)  before that tenth day, the payer provides the payee with written notice that all or part of the application is being disapproved or amended; and

  (b)  the written notice contains full particulars, including,

           (i)  the reasons for the disapproval or amendment,

          (ii)  the amount of the payment that is disapproved or amended,

         (iii)  any provisions of the contract or subcontract that are relevant to the disapproval or amendment, and

         (iv)  any other information prescribed by the regulations.

Limitation on amount disapproved or amended

   (2)  The amount of a payment that is disapproved or amended shall be limited to a reasonable estimate of any direct loss, damage, cost or expense incurred by the payer that is recoverable under the contract or subcontract.

Withholding disapproved or amended payments

   (3)  If a payment application is not approved under subsection (1), a payer may withhold that part of the payment that is disapproved or amended, but may not withhold any more than that part.

Interest on overdue payments

   13.  Interest is payable on any unpaid amount of a progress payment or a final payment at a rate that is the greater of,

  (a)  the prejudgment interest rate determined under subsection 127 (2) of the Courts of Justice Act; and

  (b)  the rate specified in the contract or subcontract.

Part III
Right to Information

Right to financial information

   14.  (1)  Before entering into a contract related to an improvement, an owner shall provide the contractor with the financial information prescribed by the regulations for the purpose of demonstrating the financial ability of the owner to make the payments provided for under the contract.

Same

   (2)  For the purpose described in subsection (1), a contractor may at any time request in writing that the owner provide updated financial information, and the owner shall promptly provide the information.

Right of subcontractor

   (3)  If a subcontractor who supplies services or materials to the improvement requests in writing that the contractor provide a copy of the information provided under subsection (1) or (2), the contractor shall promptly provide the information.

Right to information re payments

   (4)  If a subcontractor who supplies services or materials to the improvement requests in writing that the payer provide the dates on which payments in relation to the improvement become payable to the payer, the payer shall promptly provide the information.

Same

   (5)  When a payer who is a contractor or subcontractor receives a payment in relation to the improvement, the payer shall promptly notify any subcontractor who supplies services or materials to the improvement under a subcontract with the payer by,

  (a)  providing the subcontractor with written notice of the payment;

  (b)  posting the information on a website that can be accessed by the subcontractor; or

   (c)  such other means as may be prescribed by the regulations.

Confidentiality

   (6)  Any person who receives information under subsection (1), (2) or (3) shall keep the information confidential and shall not use or disclose the information for any purpose other than for which it was provided.

Liability for breach of confidentiality

   (7)  Any person who contravenes subsection (6) is liable to the owner for any damages sustained by reason of the contravention.

Liability for failure to provide information

   (8)  Where a person who is required under subsection (1), (2), (3), (4) or (5) to provide information does not provide the information as required, or knowingly or negligently misstates the information, the person is liable to the person who is entitled to the information for any damages sustained by reason of the failure to provide the information or misstatement of the information.

Order by court to comply with request

   (9)  Upon motion to the Superior Court of Justice, the court may at any time, whether or not an action has been commenced, order a person to comply with a requirement to provide information under this section and, when making the order, the court may make any order as to costs as it considers appropriate in the circumstances, including an order for the payment of costs on a substantial indemnity basis.

Part IV
Regulations

Regulations

   15.  The Lieutenant Governor in Council may make regulations prescribing anything referred to in this Act as prescribed by the regulations or as otherwise dealt with by the regulations.

Part V
Commencement and Short Title

Commencement

   16.  This Act comes into force on a day to be named by proclamation of the Lieutenant Governor.

Short title

   17.  The short title of this Act is the Prompt Payment Act, 2013.

 

EXPLANATORY NOTE

The Bill enacts the Prompt Payment Act, 2013.  The Act sets out various rules and requirements in relation to payments made under construction contracts.

Among other things, Part II of the Act entitles contractors and subcontractors to receive progress payments and to suspend work or terminate a contract if such payments are not made.  It also provides that payments can only be withheld if the payer notifies the payee that a payment application is disapproved or amended within 10 days after it is submitted.  Limits are imposed on the amount that can be withheld.

Part III of the Act requires owners to provide contractors with certain financial information before entering into a contract.  It also entitles subcontractors to receive certain financial information.

Part IV of the Act authorizes the Lieutenant Governor in Council to make various regulations, including regulations that exempt contracts or subcontracts from the application of the Act.

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