Bill 37 Prompt Payment Legislation: The Unclear Adjudication Process
The Alberta Government has promised to enact the new Prompt Payment Amendment Act, often referred to as “Bill 37”, in July 2021. One of the major changes introduced in Bill 37 is the implementation of an adjudication system to resolve payment disputes.
What We Know
The current version of Bill 37 lacks detail with respect to what the adjudication process will look like. Here is what we know.
The Minister of Service Alberta will appoint “Authorized Nominating Authorities” who will be able to assign third party adjudicators to disputes.
Although the adjudications are intended to be a final and binding process, the parties to the adjudication process will still have the option to register a builders’ lien and enforce the lien through the Court process.
Parties to a contract may refer matters to adjudication “respecting any prescribed matter”. There is no information yet with respect to what will be included in the list of “prescribed matters”. Adjudications will be conducted in accordance with the procedures set out in the Regulation or as established by the Authorized Nominating Authority.
The Adjudication process is not mandatory; however, either party (owner or subcontractor) may refer a dispute to adjudication. Once a matter is referred to adjudication, the adjudicator’s decision is final and binding. The adjudicator’s decision is subject to judicial review or appeal only in limited circumstances such as where the adjudicator made a mistake of law or did not follow the procedures for adjudication.
Where a contract contains a dispute resolution clause that provides for adjudication this clause will apply only to the extent it does not conflict with the Regulations which govern the Bill 37adjudication process. Where there is a conflict between a contract and the Regulations, the Regulations will apply.
Bill 37 has received royal assent and proclamation is expected in the summer of 2021.
What We Are Still Learning
The Regulation with respect to the adjudication process has not yet been released. Without this information it is impossible to know exactly what the adjudication process will look like. However, Ontario has already implemented legislation similar to Bill 37 which includes an adjudication process.
In Ontario adjudications are conducted through the Ontario Dispute Adjudication for Construction Contracts. Unlike the proposed process in Alberta, the adjudicator’s decision in Ontario is an interim decision and therefore not binding on the parties.
Also in contrast to Ontario, Alberta has provided for the appointment of multiple nominating authorities and these may include private entities.
In Ontario parties to a construction contact may apply for adjudication with respect to the following categories of disputes:
- The valuation of services or materials provided under the contract;
- Payment under the contract, including in respect of a change order, whether approved or not, or a proposed change order;
- Disputes that are the subject of a notice of non-payment (i.e. disputed invoices);
- Payment of a holdback;
- Non-payment of holdback; and
- Any other matter that the parties to the adjudication agree to, or that may be prescribed.
Likely, the “prescribed matters” that can be referred to an adjudicator in Alberta will be of a similar nature.
Although the adjudication process in Ontario has been in place for a while now, industry experience with the process is still quite limited, as there appears to be a strong tendency to seek a negotiated resolution prior to adjudication. Perhaps this is an indication that the legislation is meeting the objective of promoting early resolution, albeit not directly through the adjudication process.
This is a new concept and we are still learning about the benefits and consequences of this scheme. It appears that the goal of the adjudication process is to provide a quick and cost-effective means for parties to resolve disputes without the need to resort to the Courts. Although this is an attractive concept, the final and binding nature of this process can leave parties who are unhappy with the outcome of an adjudication with little recourse.
We will continue to monitor the development of Bill 37 and provide updates.
To review Bill 37 click here.
To review our previous articles on Bill 37 follow the links below:
- Pay What You Owe – Proposed Changes to the Builders’ Lien Act Regarding Prompt Payment
- A First Look at Alberta’s Proposed Prompt Payment Legislation
- Bill 37: Proposed Prompt Payment Legislation