The Rights and Risks of Sub-Subcontractor Claims Under the Public Works Act

A recent decision by the Alberta Court of Kings Bench, Alberta Social Housing Corporation v Dawson Wallace Construction Ltd., 2025 ABKB 124, sets out a warning for sub-subcontractors regarding the limited nature of their rights under the Public Works Act (the “PWA”).

If entitlement to monies are in dispute on a public works project, the Crown will typically pay the amount into Court, for a decision to be made on the disputed entitlements. However, the PWA limits recovery from those monies paid into the Court to a creditor claiming through a contractor with the Crown. The resulting effect is the right to recover from monies paid into the Court under the PWA is limited to the contractor and its subcontractors, excluding lower tier sub-subcontractors.

Background

Alberta Social Housing Corporation (“ASHC”) hired Dawson Wallace (the “Contractor”) as the construction manager for a project in Calgary. In turn, the Contractor hired Damani Stucco Solutions Inc (the “Subcontractor’) to perform work on an ASHC project, who then hired Eko Wall Systems and Adexmat (the “Sub-Subcontractors”). In April 2021, the Subcontractor abandoned the project, and the Contractor therefore withheld their payment. The Subcontractor went bankrupt, and the Sub-Subcontractors went unpaid.

The Law

The Public Works Act (the “PWA”) deals with the payment of Public Works creditors (i.e. trade contractors, labourers, material suppliers). Since a Crown’s interest in land cannot be made subject to a builders’ lien, the PWA provides a measure of protection for Public Works creditors in lieu of the lien process available for projects on private lands.

Under section 14 of the PWA, a person is entitled to bring a PWA claim if that person is not paid for the labour, equipment, material or services it provided in relation to the construction of a public work. A person who has brought a claim with respect to a public work has a priority over any other claimant with respect to money payable under the contract with the Crown for the work done on the public work.

All levels of subcontractors can give notice of claims under the PWA and the Crown has the prerogative under s. 15(1), (2) and (3) of the PWA to pay any such claimant and deduct the same from amounts owing to the contractor. In the past, the Crown would sometimes exercise their discretion based on the available evidence, but it would be rare for the Province to exercise this prerogative today, unless entitlement to the monies is not in dispute. The usual practice is that the Crown will not pay out monies (either to the contractor or a claimant) if there is any question who is entitled to the monies. Rather, the Crown will usually pay the disputed amount into Court and let the Court decide the dispute regarding entitlement.

Judicial History

After the Subcontractor walked off the job, the Sub-Subcontractors submitted PWA claims under section 14(1). The money claimed by the Sub-Subcontractors was paid into the Court by the Crown pursuant to section 15(4) of the PWA. The Order stated that the payment of these monies into the Court discharged ASHC from obligations to the Sub-Subcontractors, the monies were to be a credit to their benefit and the amounts owed by ASHC to the Contractor were reduced accordingly.

Three competing cross applications were brought by the Contractor and the two Sub-Subcontractors for the fund of money paid into the Court under the PWA. While the Sub-Subcontractors had submitted PWA claims, the Contractor had not. However, it is important to note that the Sub-Subcontractors had no obvious contractual right of action against the Contractor. 

The Application Judge held that because of the terms of the Order paying funds into the Court, the Contractor was not disentitled to claim the funds, solely because it did not give notice under s 14 of the PWA. Further, the Application Judge determined that the Sub-Subcontractors were not barred from advancing a claim for the monies under the PWA. However, the Court determined there was insufficient evidence on the whole and therefore dismissed the application.

Appeal in Court of Kings Bench

The Applications Judge’s decision was appealed by the Contractor and the Sub-Subcontractors. The appeal of the Contractor was allowed, and the appeals of the Sub-Subcontractors were dismissed.

The Court, in reviewing previous caselaw, held that section 15(4) of the PWA limited recovery only to a creditor claiming through a contractor with the Crown. The Court’s responsibility under subsection (4) is to determine who is entitled to the money, which apart from subsection (1) is the contractor, or persons claiming through it. Further, those who claim in accordance with section 14 are entitled to the monies paid into Court if they are claimants who claim through the contractor.

This does not bar different levels of subcontractors from claiming under the PWA. All levels of subcontractors (i.e. sub-subcontractors, sub-sub-subcontractors) can give notice of claims under the PWA, and the Crown could exercise its prerogative under s. 15(1), (2) and (3) to pay any such claimant and deduct the same from amounts owing to the contractor. However, where the Crown does not exercise that prerogative and the contractor has a contractual entitlement to the monies in Court, as in the case at bar, only subcontractors that claim through the contractor can claim an entitlement to the monies in Court.

This was the issue at hand, as both Sub-Subcontractors’ claims arose under the subcontract with the Subcontractor, not the Contractor. Therefore, neither Sub-Subcontractor had any direct right of action against the Contactor. Previous caselaw has held that PWA claimants must demonstrate a direct right to claim that would otherwise belong to the general contractor. Therefore, as the Sub-Subcontractors were two steps down the chain, they were not advancing claims “through” the Contractor, who has an entitlement to the monies in held in Court.

The Court therefore concluded that the Contractor was entitled to the monies under the PWA. The Court concluded that the Applications judged was incorrect in finding that the Sub-Subcontractors, with no right to claim through the Contractor, were entitled to claim under the PWA.

Impacts of Recent Amendments to the PWA – Other Considerations

Recently, substantive amendments were made to the PWA (for more information, read our recent blog post). While the amendments do not have impacts on the outcome of this case, the recent amendments give all parties on PWA projects the additional benefit of prompt payment. This PWA prompt payment process largely mirrors the prompt payment provisions of the PPCLA, including:

• “Proper invoices” must be given to the Crown at least every 31 days
• The Crown is required to pay proper invoices within 28 days (or give notice of dispute within 14 days)
• Contractors are required to pay subcontractors the undisputed amount payable no later than 35 days after receiving the subcontractors’ proper invoice

The PWA claims process remains relevant as a mechanism for security for payment; however, this mechanism is of limited value to sub-subcontractors. 

The content of this article is intended to provide a general guide to the subject matter. Legal advice should be sought about your specific circumstances. If you require assistance, please connect with our Construction Law team.