5/15/2019 Improving the Agenda speed of payment Speed of Payment - PDF document

5/15/2019 Improving the Agenda speed of payment • Speed of Payment ‐ Introduction under the new • Prompt Payment • Applicability of Prompt Payment Construction Act • The “Proper Invoice” • Payment Terms • Certification of Payments OGCA Symp OGCA ymposium - April 20 il 2019 • Timing of Payment and Notices of Non Payment Ray Bassett, Paul Raboud, Chris Moran, and James Little • Set ‐ off Rights • Adjudication and Other Remedies • Mechanisms to Aid Payment • Practical Considerations This presentation does not constitute legal advice or a legal opinion on any matter discussed. 2 This presentation does not constitute legal advice or a legal opinion on any matter discussed. Speed of Payment - Introduction Speed of Payment - Introduction • “ Ordinary Course ” – for monthly progress draws and holdbacks in the ordinary course, payment periods have become elongated in relation from 1. It is not all just about speed of payment the period of time from the submission of a payment application to the receipt of payment 2. Relationships are critical • “ Gridlock ” – for disputes resulting in delay and damages, a cessation of 3. Proper billing procedures are key payment down the construction chain, and potentially protracted litigation • Set ‐ off and “pay ‐ when ‐ paid” clauses can also contribute to cascading 4. Who you partner with matters payment delays 5. People will still play games • Liens are useful security against non ‐ payment during insolvency, but lien litigation is slow and cumbersome (e.g. disputes over performance) 6. Change is coming, but adjustments take time 3 4 This presentation does not constitute legal advice or a legal opinion on any matter discussed. This presentation does not constitute legal advice or a legal opinion on any matter discussed. 1

5/15/2019 Speed of Payment - Introduction Prompt Payment Payment Types • Prompt payment applies to both the public and private sector • Seeks to ensure that all parties down the construction pyramid are paid promptly • Cannot contract out of prompt payment but parties are free to PROGRESS DRAWS CHANGE ORDERS & CLAIMS contract in respect of payment terms (e.g. allow milestone payments, etc.) • Prompt Payment provisions take effect on or after October 1, 2019, with the following exceptions:  Will not apply to contracts entered into before October 1, 2019 (s. 87.3(4)(1))  Will not apply to contracts entered into on or after October 1, 2019 for which a “procurement process” was commenced before October 1, 2019 (s. 87.3(4)(2)) Prompt payment provisions Adjudication  Will not apply to any subcontracts made under the & sometimes adjudication contracts described above (s. 87.3(4)(3)) This presentation does not constitute legal advice or a legal opinion on any matter discussed. This presentation does not constitute legal advice or a legal opinion on any matter discussed. 5 6 The “Proper Invoice” Payment Clock is Triggered by the “Proper Invoice” Lien Act Provision Take Away → 6.1 In this Part, • Trigger for payment is the delivery of a “proper invoice” by Contractor (defined in s. 6.1) • Owner and GC can agree to contract terms that make “proper invoice” means a written bill or other request for payment  An Owner must pay within 28 days of receipt or deliver a notice of non ‐ payment within the criteria for a proper invoice more onerous (not for services or materials in respect of an improvement under a less). contract, if it contains the following information and, subject to 14 days of receipt if disputing all or any portion of the amount payable (ss. 6.4(1) and (2)) subsection 6.2 (2), meets any other requirements that the contract specifies: • NOTE: The Act speaks only to the invoice given by the • Timing of delivery of a “proper invoice” 1. The contractor’s name and address. GC to the Owner. This proper invoice is the single event  Delivered monthly unless the contract provides otherwise (s. 6.3) that triggers all of the timelines throughout the 2. The date of the proper invoice and the period during which the services or materials were supplied. payment chain.  Right to information about payment schedule (s. 39) 3. Information identifying the authority, whether in the contract or otherwise, under which the services or materials were supplied. • The Act does not speak to the billing process between a • Only the Contractor’s invoice is the “proper invoice” (s. 6.3) 4. A description, including quantity where appropriate, of the services or subcontractor and a GC. There are no statutory  The “proper invoice” requirement does not apply to: (1) invoices from materials that were supplied. requirements around the timing, form, prior approval 5. The amount payable for the services or materials that were supplied, Subcontractors to Contractor; or (2) invoices from Sub ‐ subcontractors or other requirements of an invoice from a trade to a and the payment terms. GC. to Subcontractors 6. The name, title, telephone number and mailing address of the person to whom payment is to be sent. 7. Any other information that may be prescribed. 8 This presentation does not constitute legal advice or a legal opinion on any matter discussed. 7 This presentation does not constitute legal advice or a legal opinion on any matter discussed. 2

5/15/2019 Rules related to the “Proper Invoice” Certification of Payments • Proper invoice can be revised after submission. The 6.1 (2) Nothing in this Part prevents the revision of a proper • The delivery of a proper invoice cannot be conditional on date must not change and the other requirements of a invoice after it has been given, so long as the date of the “proper invoice” must be met proper invoice is not changed and the proper invoice certification continues to meet the requirements set out in subsection  Exception: AFPs (in the PA or Prime Contract)(s. (1). 1.1(2.1)) • Contracts with an owner can have milestone or other 6.2 (1) Proper invoices shall be given to an owner on a  Requiring certification after a proper invoice is payment periods that are not monthly. monthly basis, unless the contract provides otherwise . delivered is not prohibited (s. 6.3(3)) (2) A provision in a contract that makes the giving of a • Prior approval by the owner/certifier cannot be a pre ‐ • Certification processes now will be built into prompt condition – except on AFP/P3 proper invoice conditional on the prior certification of a payment timelines payment certifier or on the owner’s prior approval is of no  i.e., to be completed within 14 days of the proper force or effect. • Owner/certifier approval after can be a condition of payment (but the 28 ‐ day clock starts with submission of invoice to allow for the delivery of a notice of non ‐ the proper invoice, not with the approval). (3) For greater certainty, subsection (2) has no application to payment if necessary a provision in a contract that provides for the certification of • Requires a re ‐ engineering of internal processes – engage a payment certifier or the owner’s approval after a proper invoice is given. with payment certifier early and often 9 11 This presentation does not constitute legal advice or a legal opinion on any matter discussed. 9 The Rules For Payment (Owner) The Rules For Payment (GC) • If the GC receives full payment within 28 days, then within 7 days of being paid the GC must pay trades whose • Owners are required to pay within 28 days after receiving the proper invoice from the contractor work was included in the proper invoice (s. 6.5(1)). unless it issues a notice of non ‐ payment (s. 6.4(1)) • If the GC receives only partial payment, then within 7 days of being paid the GC must distribute that payment to • Owners may refuse to pay some or all of the amount payable under the proper invoice if they give trades whose work was included in the proper invoice (s. 6.5(2)). a notice of nonpayment to the contractor no later than 14 days following receipt of the proper • If the amount not paid by the Owner relates to work by specific trade(s), then the GC must pay all other trades invoice (notice must specify the amount that is not being paid and all reasons for the non ‐ first. Any remaining funds must be paid to the implicated trades pro ‐ rata (i.e. as partial payment) (s. 6.5(3)). payment) (s. 6.4(2)) • Within 35 days of the proper invoice, the GC must pay all trades any balance due (s. 6.5(4)). • The owner is required to pay all amounts payable under the proper invoice that are not the subject of the notice of non ‐ payment (s. 6.4(3)) • Prompt payment provisions do not effect the requirement to pay wages (s. 6.8) • Reasons for non ‐ payment can include set off (s. 6.7) NOTE: If the GC doesn’t give the proper notices of non ‐ payment below, then the GC will be required to pay even amounts that are disputed by the owner or the GC. This presentation does not constitute legal advice or a legal opinion on any matter discussed. 11 12 This presentation does not constitute legal advice or a legal opinion on any matter discussed. 3