What if I just don’t? A cautionary tale for those who ignore Saskatchewan’s new prompt payment requirements

For the past several years, we have been presenting to the construction industry the pending (and as of March 1, 2022, now in force) prompt payment provisions, which are now included in The Builders’ Lien Act of Saskatchewan. A common question that arises during every discussion on the topic is “what if I just don’t follow these provisions?” While the answer in many cases is clearly outlined in the legislation, there are many unknowns as well. For example, we know that if an Owner does not formally dispute an invoice within 14 days, the invoice becomes due and payable. However, some wondered about the repercussions of simply ignoring the paperwork or payment requirements along the way.  Surely there would be some second chances? We often rely upon Court decisions to interpret legislation, but since the legislation itself is new, it may be a while before we know how the Saskatchewan Courts will address questions of this nature.

Fortunately, we can now take some guidance from the Courts in Ontario (the first jurisdiction in Canada to enact prompt payment legislation.) Their prompt payment provisions have been in place for over two years, and the related Court decisions are now starting to trickle in. The verdict? The Courts fully appreciate the importance of the prompt payment provisions and will interpret them strictly and to the detriment of those who choose to ignore them.

One such case was very recently reported in SOTA Dental Studio Inc. v. Andrid Group Ltd., 2022 ONSC 2254. SOTA hired Andrid to construct a dental clinic in Vaughn, Ontario. Andrid issued invoices to SOTA, none of which were disputed within 14 days of receipt, making those invoices due and payable. When SOTA did not pay within the required 28 days, Andrid invoked the adjudication process and obtained a decision from the adjudicator requiring SOTA to pay the invoiced amount. SOTA continued to ignore its payment obligations, leaving Andrid to pursue enforcement measures. Andrid was able to garnish a portion of the amount owing from SOTA’s bank account, but the majority of the debt remained unpaid.

Similar to Saskatchewan, Ontario’s prompt payment legislation permits a party to apply for judicial review of an adjudicator’s decision, though in Ontario the parties are required to seek leave of the Court to do so, which is not a requirement in Saskatchewan. However, in both provinces, an application for judicial review does not operate as a ‘stay’ of the adjudicator’s order unless the Court orders otherwise.

SOTA was granted leave to bring the judicial review application but did not seek a ‘stay’ of the adjudicator’s decision in the interim. As such, the adjudicator’s decision remained enforceable until the judicial review application was heard by the Court.

In advance of the hearing, the Court flagged their concern with SOTA’s continued failure to pay the amount owing under the adjudicator’s decision. Notably, the Court outlined the following principles to be understood by all parties in the construction industry:

[12]           …  So that there is no misunderstanding in future cases, we suggest the following principles to be borne in mind.

(a) prompt payment is integral to the scheme of the Construction Act. 

(b) failure to pay in accordance with the prompt payment requirements of the Act may lead this court to refuse leave.  Where leave is granted, an applicant must obtain a stay or must make payment, failing which this court may dismiss the application on motion to quash or at the hearing of the application.

At the hearing, SOTA argued that it had not made payment because “there was no money.” The Court responded sternly:

[13] … If the owner is insolvent, as appears to be the case, it should not be permitted to run up costs and delays through recourse to litigation in the face of the order below and the prompt payment provisions of the Act.  If there are circumstances that should lead the court to grant a stay, in all of these circumstances, these must be established on proper evidence in the context of a motion for a stay.

And with that, the Court dismissed SOTA’s application for judicial review and awarded costs to Andrid in the sum of $10,000.

So, what’s the answer to the question “what if I just don’t?” Well, so far the message appears to be that the Courts will take no mercy upon you. All parties in the construction industry should understand the prompt payment and adjudication requirements that are now in force for non-exempt construction contracts entered into after March 1, 2022. In this case, ignorance will not be bliss!

This article is intended to provide legal information only, not legal advice.  Dividing family property can be quite complicated. It is recommended that you seek the advice of a lawyer when considering the division of family property.

For further information, please contact:

Misty S. Alexandre
Direct: 306-933-1352
Email: [email protected]

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