Prompt payment legislation has been in force in the United Kingdom for almost 30 years. Notwithstanding its reported effectiveness overseas, it has been slow to gain traction in Canada. In July 2018, Ontario enacted the "modernization" of its Lien Act, and on October 1, 2019, prompt payment legislation came into effect in that province. Prompt payment legislation is also awaiting proclamation in Saskatchewan.
In Alberta, the introduction of prompt payment legislation through a private member's bill in 2015 has been the subject of significant industry interest but less than prompt progress in our legislature. The legislature does seem to be lurching ahead with prompt payment legislation, and on October 21, 2020, Bill 37, the Builders' Lien (Prompt Payment) Amendment Act, 2020 (hereafter "the Act") passed First Reading and on December 9, 2020, Bill 37 received Royal Assent. No one seems to be sure when the Act will come into force, but, in the interim, contractors can get the form and content of their invoicing into enforcement-ready form.
The construction industry is (in)famous for making payment conditional on much more than the supply of material or performance of work to specification. For example, contractors routinely need to include with monthly progress draws a prescribed form of Statutory Declaration confirming payment to subcontractors and suppliers.
Section 32(1) of the Act defines a "proper invoice" to be a request for payment that contains:
- the contractor's name and business address;
- the date of the proper invoice and the period during which the work was done or materials were furnished;
- information identifying the authority, whether in a written or verbal contract or otherwise, under which the work was done or materials were furnished;
- a description of the work done or materials furnished;
- the amount requested for payment and the corresponding payment terms broken down for the work done or materials furnished;
- the name, title and contact information of the person to whom the payment is to be sent;
- a statement indicating that the invoice provided is intended to constitute a proper invoice; and
- any other information that may be prescribed.
We do not have further direction or guidance on what constitutes a proper invoice in any Regulation. That said, items (a), (b), (c), (d) and (f) are straightforward and likely already found in most contractors' bills. The requirement in 32(1)(e) for payment terms corresponding to the amount invoiced should be satisfied by referring to the underlying contract's payment terms. For example, a general contractor might reference GC 5.2 and 5.3 in the CCDC2 with the quantification of the proportionate amount of work performed as of the last day of the payment period in question. Notwithstanding that section 32(1)(c) indicates that a verbal contract may be the basis of a proper invoice, it is strongly recommended that contracts are in writing and expressly include payment terms. At the very least, most purchase orders stipulate payment in full (for services rendered or materials supplied in full) within 30 days of completion. Item (g) should be satisfied relatively easily by adding to the invoice a statement to the effect of: "This invoice is intended to be a proper invoice pursuant to Alberta's Builders' Line and Prompt Payment legislation." Item (h) may be the provision of Statutory Declaration, for example, or anything else that the paying party requires as a precondition to payment.
Readers are encouraged to tune into Prompt Payment Legislation: The Impact on the Alberta Construction Industry for detailed information on payment deadlines and responsibilities on a construction project. If you are unavailable to attend the webinar during the scheduled time, please register, and a recording will be sent out to you.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.