Introduction
When multiple parties contribute to a public construction project, but not all get paid, which of these parties has the legal right to claim unpaid funds? This question recently came before the Alberta Court of King's Bench in a rare and significant decision interpreting the Public Works Act, RSA 2000, c P-46 (the "PWA").
In Alberta Social Housing Corporation v Dawson Wallace Construction Ltd., the Court allowed the appeal of a General Contractor and dismissed the competing claims of two "Subsubcontractors." The decision is noteworthy as there is minimal judicial interpretation of the PWA, and it specifically bars submitted PWA claims of subsubcontractors on the basis of a strict interpretation of Section 14 of the PWA, which only refers to "contractors" and "subcontractors."
Background
The dispute arose from a public construction project commissioned by the Alberta Social Housing Corporation ("ASHC"), which contracted a General Contractor. The General Contractor subcontracted a portion of the work to a Subcontractor, who then further subcontracted to two Subsubcontractors. After the Subcontractor abandoned the project and subsequently declared bankruptcy, the two Subsubcontractors were left unpaid. Both Subsubcontractors filed Notices of Claim under Section 14 of the PWA, seeking to recover the unpaid amounts.
In response, ASHC paid $311,164.27 into Court pursuant to a consent order under Section 15(4) of the PWA. The order confirmed the amount was "due and owing" to the General Contractor under its contract with ASHC, but expressly preserved the claims of the two Subsubcontractors pending the Court's determination.
The core legal issue before the Alberta Court of King's Bench was straightforward: who between the General Contractor and the two Subsubcontractors was legally entitled to the funds held in Court?
The application decision
The Application Judge dismissed all parties' applications on the basis of inadequate evidence, choosing not to resolve the dispute over entitlement. However, he did find that the two Subsubcontractors had a sufficient basis to advance a claim under a "pragmatic and remedial" reading of the PWA and the consent order.
Court's analysis: Who is entitled to PWA funds?
On appeal, the Alberta Court of King's Bench allowed the General Contractor's appeal and dismissed those of the two Subsubcontractors. The Court's decision relied heavily on two foundational Alberta authorities:
- Alberta v Opron Construction Company ("Opron") and
- Alberta Government Telephones v Canadian Great Lakes Casualty and Surety Company Ltd.("AGT").
Both of these decisions affirm that only contractors—or those claiming directly through them—can access funds paid into court under Section 15(4) of the PWA. Subsubcontractors, who are not in privity with the owner or contractor and do not claim through the contractor, are excluded.
The Court concluded that the two Subsubcontractors, as creditors of the Subcontractor and not of the General Contractor, had no standing under Section 15(4) of the PWA to claim the funds held in Court. Their legal remedy lies against the Subcontractor's estate through bankruptcy proceedings, not through the PWA.
The two Subsubcontractors had relied on two other cases:
- Graham Construction and Engineering Inc. v Alberta (Infrastructure) and
- Moonview Builders Ltd. v Alberta Housing Corporation.
However, the Court found that these decisions either predated or failed to consider the binding appellate precedent established in AGT, and reinforced that AGT and Opron remain the controlling authorities.
Interestingly, although the General Contractor had not filed a formal Notice of Claim under Section 14 of the PWA, the Court nonetheless found it entitled to the funds. This conclusion was based on the terms of the consent order and the uncontested evidence of the General Contractor's entitlement under its contract with ASHC.
Implications for the construction industry
This decision confirms a principle in Alberta's construction law: only contractors or those directly claiming through them may access funds paid into court under the PWA. The ruling reinforces the importance of contractual privity and discourages efforts by downstream subsubcontractors to bypass the established payment chain via statutory interpretation.
The decision is particularly interesting in light of recent legislative amendments to the PWA, which came into force on April 1, 2025. These amendments do not alter the limitation in Section 14 of the PWA to claims by "contractors" and "subcontractors." They do, however, provide in Section 15(5) that a PWA claimant has priority over any other person (other than the Crown) with a claim in respect to money payable under a contract or subcontract. Section 15(5) is noteworthy as there is no hierarchy of priority to the funds, and as such presumably the contractor would be entitled to the same priority as a subcontractor claiming through that contractor. All of which is a clear reminder that parties seeking to secure payment on public, or public adjacent projects, ought to explore all potential avenues to secure payment, including the PWA, liens, and labour and material bonds. Subsubcontractors in particular should be aware of this decision in conducting risk assessments on public projects, while general contractors are reminded that they too should submit formal PWA claims to preserve the priority claim created by Section 15(5).
Key takeaways for construction stakeholders
- The Court has reaffirmed a strict, privity-based interpretation of the PWA, limiting equitable arguments for downstream claimants—only contractors and subcontractors directly contracted by the contractor can claim money paid into court under Section 15(4) of PWA.
- A consent order acknowledging a contractor's contractual entitlement to funds strengthens their position, even absent a formal PWA claim.
- Subsubcontractors cannot claim these funds unless their right to payment is clearly passed down through the contractor—such as by assignment or direct contractual link.
- Subsubcontractors should ensure their legal remedies include lien rights and access to surety bonds.
Conclusion
The Alberta Court of King's Bench decision provides important clarity on the limits of entitlement under the PWA, particularly for subsubcontractors seeking recovery on public projects. With legislative amendments now in force and judicial interpretation evolving, construction stakeholders must be proactive in assessing their payment security strategies.
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.
