In the dynamic world of construction, timely payment is essential for maintaining cash flow, project momentum, and strong business relationships. Yet, despite best efforts, payment disputes and delays can arise, threatening the financial health of projects, owners, contractors, subcontractors, and suppliers. Understanding the legal framework governing payment in Saskatchewan's construction industry, and knowing the options available to resolve disputes, can make all the difference.
Understanding Prompt Payment Legislation in Saskatchewan
Since March 1, 2022, Saskatchewan's Builders' Lien (Prompt Payment) Amendment Act and accompanying regulations have set clear standards for payment timelines and dispute resolution on construction projects. Under this legislation:
- Owners must pay contractors within 28 days of receiving a "proper invoice" — one that meets specific criteria set out in the Act.
- Contractors must pay their subcontractors within 7 days of receiving payment from the owner.
- If a party disputes an invoice, they must issue a written "notice of non-payment" within 14 days, detailing the disputed amounts and reasons.
- Payment disputes can be efficiently resolved through an adjudication process administered by the Saskatchewan Construction Dispute Resolution Office (SCDRO), which provides a quick, binding decision within 30 days.
This legislative framework is designed to promote fairness and prevent the harmful effects of delayed payments in the construction industry.
What the Courts Are Saying: No Mercy for Non-Compliance
While Saskatchewan's legislation is relatively new, recent court decisions from Ontario—the first Canadian province to implement prompt payment legislation—offer important guidance. In SOTA Dental Studio Inc. v. Andrid Group Ltd., 2022 ONSC 2254, the Ontario Superior Court emphasized that ignoring payment obligations under prompt payment laws will not be tolerated. Courts are dismissing attempts to delay payment or use judicial reviews to stall enforcement without proper cause, stressing that insolvency is not a free pass.
Though this Ontario case is not binding on Saskatchewan courts, it will likely be persuasive and signal that Saskatchewan courts will adopt a similarly strict stance. This makes understanding and complying with prompt payment and adjudication requirements critical for all parties in the construction industry.
Initial Steps: Building a Strong Foundation for Payment Recovery
When payment issues arise, immediate and strategic steps can often avoid lengthy and costly litigation:
- Contract Review: Before any work begins, or when a dispute arises, a thorough review of your contracts and subcontracts is crucial. Understanding payment terms, invoicing requirements, and dispute resolution clauses can guide your next moves.
- Demand Letters: A formal demand letter clearly outlining the payment owed and referencing contractual obligations can sometimes prompt payment without further escalation.
- Alternative Dispute Resolution (ADR): Mediation, arbitration, and negotiation provide effective tools that give parties the opportunity to settle disputes amicably, saving time and legal expenses. ADR processes encourage cooperation and can preserve business relationships.
When Payment is Still Unresolved: Legal Remedies
If early interventions fail, several formal legal options exist to recover payment:
- Builders' Liens: Filing a lien against the property where work was performed or materials supplied provides a powerful security interest. This legal claim ensures your payment is prioritized before the property is sold or refinanced. The lien process involves strict deadlines and procedural steps, so timely action and expert guidance are essential.
- Small Claims Court: For amounts up to $50,000, Small Claims Court offers a relatively quick and cost-effective forum to pursue unpaid invoices. This process typically involves filing a claim, serving the defendant, attending a hearing, and receiving a judgment enforceable by the court.
- Court of King's Bench: For claims exceeding the Small Claims limit or more complex disputes, filing a claim in the Court of King's Bench provides a formal judicial avenue. This process involves more detailed procedures, discovery, and potentially trial, but may be necessary for significant sums or complicated matters.
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.
