Skip to content

New Brunswick introduces prompt payment and adjudication legislation

By Conor O’Neil and Maria Cummings

On May 9, 2023, two bills were introduced in the New Brunswick Legislature that could have material affects on the construction industry. Bills 41 and 42, of the current session, if passed, would amend the Construction Remedies Act, and introduce a new companion act which would establish mandatory prompt payment and adjudication for construction projects. As of the writing of this article, both bills are working through the legislature and will not become law unless passed in this session.

Bill 41, an Act respecting holdback trust accounts

Bill 41, if passed, will amend the Construction Remedies Act to repeal the requirement for an owner to maintain a holdback trust account for each improvement with a joint trustee. The requirement to maintain holdback by an owner will remain but the practical effect will be to return to the practice under the historical Mechanics’ Lien Act whereby an owner is not required to deposit the holdback into a separate trust account.

Bill 42, Construction Prompt Payment and Adjudication Act

Bill 42, if passed, will introduce a completely new act, the Construction Prompt Payment and Adjudication Act (the “Act”). The application of the Act is defined almost identically to the Construction Remedies Act. In other words, it will apply to almost any construction contract, although there is potentially broad authority to exempt certain classes of improvements, persons or contracts in the regulations. Its effect will be to introduce a new regime including prompt payment and adjudication.

Prompt payment legislation is aimed at the perception of systemic slow or non-payment in the construction industry. The first Canadian prompt payment bill was introduced in Ontario in 2017. Since then prompt payment and adjudication legislation has been considered in a majority of provinces, and federally, many of which have introduced and passed their own bills, although it is not in force in every jurisdiction in which a bill has been introduced.

The prompt payment portion of the Act prescribes time periods in which payment must flow through the construction pyramid. After the delivery of a “proper invoice” by a contractor to an owner, the owner has 28 days in which it must pay the proper invoice. The owner may dispute the proper invoice by issuing a notice of non-payment within 14 days of receipt of the proper invoice. Even if a notice of non-payment is issued, the owner must pay the undisputed portion of the proper invoice within the same 28-day window.

The time period for payment cascades down the construction pyramid through direct contracting parties. For example, upon receipt of payment on the 28th day by the contractor, that contractor then has 7 days in which to provide payment to its subcontractor(s) (i.e. by day 35). Similarly, upon receipt of payment by a subcontractor it must pay its sub-subcontractors or suppliers within 7 days (i.e. by day 42).

Adjudication provides the teeth to enforce prompt payment. A common criticism of traditional dispute resolution processes, like litigation or arbitration, is that they are too slow and disputes choke off the cash flow necessary for projects to continue on to completion. Adjudication provides a new option that has been described as an interim-binding dispute resolution.

The Act provides that much of the actual process for adjudication will be set out in the regulations, or by the adjudicator nominating authority. However, in other jurisdictions the intent has been that where there is a dispute as to payment that dispute may be referred to a third-party adjudicator and a decision on the dispute may be rendered in as little as 39 to 60 days. The concept is that the decision of the adjudicator is only binding on the parties to a dispute until the project is substantially performed. In theory, this increases cash flow and provides an interim mechanism for the parties to complete the project. Parties that are unhappy with the result of an adjudication are free to litigate or arbitrate after the fact.

Other provinces have taken varied approaches to the appointment of an adjudicator nominating authority and the training and certification of adjudicators. The regime as a whole has been met with mixed reviews on its success. Prompt payment and adjudication is still in its infancy across Canada and it remains to be seen how this could be effectively implemented in New Brunswick.


This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact the authors.

Click here to subscribe to Stewart McKelvey Thought Leadership.

SHARE

Archive

Search Archive


 
 

Forward focus: Canada’s ambitious immigration plan

December 14, 2023

By Brendan Sheridan The Government of Canada has continued their whirlwind year of immigration program announcements by revealing their plan to modernize and improve the country’s immigration system. This plan, known as “An Immigration System…

Read More

Preparing for Canada’s “Modern Slavery Act”: considerations and guidance for businesses

November 30, 2023

By Christine Pound, ICD.D, Rebecca Saturley, & Daniel Roth Canada’s anti-modern slavery legislation comes into force on January 1, 2024. To prepare for the first reporting deadline on May 31, 2024, organizations need to determine…

Read More

Replace-me-not: Bill C-58 proposes ban on replacement workers in federal strikes and lockouts

November 29, 2023

By Brian Johnston, K.C. and Richard Jordan On November 9, 2023, Minister of Labour, Seamus O’Regan, introduced Bill C-58 in the House of Commons to amend the Canada Labour Code to prohibit the use of…

Read More

Final retail payment activities regulations released

November 28, 2023

By Kevin Landry & Eryka Gregory The Retail Payment Activities Regulations (“Regulations”) under the Retail Payment Activities Act (“RPAA”) were finalized and published in the Canada Gazette Part II on November 23, 2023. The RPAA was…

Read More

Nova Scotia offers new pension option to private sector employers

November 24, 2023

By Level Chan When proclaimed in force, the Nova Scotia Private Sector Pension Plan Transfer Act (the “Transfer Act”) enacted by Bill 339, Financial Measures (Fall 2023) Act will allow the transfer of private sector…

Read More

Bill C-365 calls for plan for implementation of open banking in Canada

November 17, 2023

By Kevin Landry On November 9 2023, Bill C-365, An Act respecting the implementation of a consumer-led banking system for Canadians (“C-365”), short titled as the ‘Consumer-led Banking Act’ was read in the House of…

Read More

More limits: NSCA tightens the test for disallowing a limitations defence

November 15, 2023

By Jennifer Taylor The Nova Scotia Court of Appeal (“NSCA”) has issued an important decision clarifying the test to disallow a limitations defence. The decision, Halifax (Regional Municipality) v Carvery (“Carvery”), has real implications for personal…

Read More

Anticipating changes to the Competition Act: what businesses need to know

November 1, 2023

By Deanne MacLeod, K.C., Burtley Francis & David Slipp On September 21, 2023, the Federal Government introduced Bill C-56: An Act to amend the Excise Tax Act and the Competition Act (“Bill C-56”), with the…

Read More

Powering the future: Green choice program regulations

September 22, 2023

By Nancy Rubin, K.C. and Lauren Agnew The long-awaited Green Choice Program Regulations (N.S. Reg. 155/2023) were released by the provincial government on September 8, 2023, offering some clarity into the practical implementation of Nova…

Read More

Privilege protected: Court of Appeal rules NL’s Information and Privacy Commissioner barred from reviewing solicitor-client privileged information

September 20, 2023

By Koren Thomson, John Samms, and Matthew Raske The Newfoundland and Labrador Court of Appeal has held that the Information and Privacy Commissioner for this province (the “Commissioner”) does not have the authority to order…

Read More

Search Archive


Scroll To Top