18 Dec 2017

For over three decades, the construction industry in Ontario has been subject to the Construction Lien Act (the CLA), legislation with which most construction professionals there have had a somewhat fractious rapport. In recent years, mounting aversion to the CLA culminated in a series of consultations to deliberate how it could be developed. During one consultation held on 3 December 2015 by the Associations of Municipalities of Ontario, the consensus was that construction disputes at all levels were overpriced and took "three or four years to [settle]". Another consultation held on 9 November 2015 by the Council of Ontario Construction Associations revealed that the "top priority" for any modification to the CLA should be "prompt payment".   

Using these responses, a new piece of legislation aimed at modernising the CLA was presented on 31 May 2017, known as Bill 142. Interestingly for construction lawyers in the United Kingdom, Bill 142 tackles the issues of payment and dispute resolution using equivalent provisions to the United Kingdom's Housing Grants, Construction and Regeneration Act 1996 (as later amended by the Local Democracy Economic Development and Construction Act 2009) and the Schemes for Construction Contracts (the Construction Act and the Schemes respectively), introducing adjudication as a dispute resolution method as well as prompt payment regimes. 

Payment provisions and adjudication in Bill 142 and The Construction Act and the Schemes

In many ways Bill 142 bears a striking resemblance to the Construction Act and Schemes. Under UK law, for instance, the decision of an adjudicator is binding and enforceable on the parties, unless and until that decision is finally determined by legal proceedings, arbitration or agreement. Similarly, Bill 142 states that an adjudicator's decision is binding on the parties subject to the underlying matter being determined by the court or an arbitrator. 

For a more detailed comparison of Bill 142 in respect of payment provisions and adjudication, please click here.

Other jurisdictions

Ontario is not the only jurisdiction to have incorporated particular provisions of the Construction Act into their construction regulatory system. Other instances include:

  • Germany's recent modification of the 8th section of the second book of the German Civil Code which is set to become law on 1 January 2018.

This contains a new employer entitlement to apply for an adjustment to agreed remuneration, not unlike a pay less notice under the Construction Act. 

For further information on this amendment, please look out for our latest construction newsletter to be published shortly which will include an article on the subject by Womble Bond Dickinson's German alliance firm, Redeker Sellner Dahs.

  • Ireland's Construction Contracts Act 2013, ratified in July 2016. 

This also contains an equivalent to a pay less notice, allowing a party 21 days to challenge all or part of any payment notice; 

  • New South Wales' (Australia) Building and Construction Industry Act 1999. 

This includes an ability to apply for adjudication upon a payment dispute; and 

  • Singapore's Building and Construction Industry Security of Payment Act 2006. 

This imports a default payment regime into a contract if one is not arranged. 

Conclusion

The worldwide use of the Construction Act demonstrates the success that the legislation has had since becoming law in the United Kingdom. As one leading lawyer in Canada said about adjudication under the Construction Act, for instance, "it is a proven and pragmatic solution for projects gridlocked by dispute".

It will be fascinating to see the outcome of the Government's recently announced consultation on both the implementation of the Construction Act and the use of cash retentions, and whether the United Kingdom construction industry feels as optimistic about the Construction Act as other jurisdictions appear to be.