Casual legal: Dispute now or forever hold your peace
DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.
By Sean Ward
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider
Any time a municipality undertakes a project that is subject to the Prompt Payment and Construction Lien Act, staff are required to manage and be mindful of a number of critical timelines and requirements. Those include the time frames for maintaining and releasing lien holdbacks, and the deadlines for making payment in response to contractor invoices.
But one of the most important and critical deadlines is also one of the tightest and hardest to manage. Section 32.2(2) of the Act provides that if an owner disputes all or any part of a proper invoice it receives, it must give written notice in a prescribed form specifying the amount that is not being paid and detailing the reasons for non-payment. That notice must be given within 14 days of receiving a proper invoice, otherwise the owner is required to pay the invoice within 28 days of receipt.
A decision issued by an adjudicator under the Act issued this year highlights the risk of failing to strictly comply with that requirement.
In that case, a contractor had submitted an invoice near the end of the project that sought payment for work completed and additional compensation for certain change orders. The owner responded with correspondence disputing that such amounts were owing. The owner then terminated the contract with the contractor, and after the termination the contractor submitted a final invoice again seeking payment for the work completed up to termination and the outstanding holdback. That final invoice met the requirements to be considered a “proper invoice” under the Act.
The owner did not provide a notice disputing the invoice within 14 days. However, they argued at the adjudication that they had previously disputed the contractor’s entitlement to be paid for the work set out in the invoice, based on work they felt was not performed or was deficient. They had previously objected to the very similar invoice issued by the contractor earlier before termination.
Nevertheless, the adjudicator concluded that section 32.2(2) creates a strict obligation to dispute any proper invoice within 14 days, using the prescribed form in the Prompt Payment and Construction Lien Forms Regulation. Even in circumstances where the contractor knew the owner disputed their entitlement to payment, the failure to provide this notice meant that the owner was required to pay the invoice in full within 28 days. Therefore, the adjudicator ordered the owner to pay the proper invoice plus interest from that date and costs of the adjudication.
That decision is a useful reminder of the importance for municipalities of ensuring their staff or consultants are prepared to very quickly review and respond to any proper invoices on a construction project, and to ensure that any dispute is provided in the proper format within that short 14 day period.
To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1.800.661.7673 or email casuallegal [at] abmunis.ca (casuallegal[at]abmunis[dot]ca) and reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please contact riskcontrol [at] abmunis.ca (riskcontrol[at]abmunis[dot]ca), or call 310.MUNI (6864) to speak to Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.
