Welcoming Home Clarifications to Alberta’s Prompt Payment and Lien Legislation: The Welcome Homes Decision

Welcoming Home Clarifications to Alberta’s Prompt Payment and Lien Legislation: The Welcome Homes Decision

Almost two years after the legislation came into force, the Alberta Court of King’s Bench has released its first decision[1] on the adjudication provisions of Alberta’s Prompt Payment and Construction Liens Act (“PPCLA”).[2] Aptly named Welcome Homes Construction Inc v Atlas Granite Inc, the decision is welcome guidance for Alberta’s construction industry.

As a refresher, our prior bulletin[3] summarized the changes to the PPCLA and its accompanying Prompt Payment and Adjudication Regulation (“PPCLA Regulation”).[4] Following our earlier bulletin, the Minister of Service Alberta and Red Tape Reduction selected ARCANA AB as a Nominating Authority under the PPCLA to appoint adjudicators.[5] In addition, an exemption has been given to Dow Chemical Canada ULC and its contractors for materials provided or work done for the Path2Zero Expansion Project from the requirement to provide proper invoices at least every 31-days as per section 32.1(6) of the PPCLA.[6]

Welcome Homes Decision

Welcome Homes Construction Inc (“Welcome Homes”) hired Atlas Granite Inc (“Atlas Granite”) to supply countertops for a new home. During the installation process, a dispute arose over the correct dimensions for the kitchen island countertop.[7] As a result of the dispute, Welcome Homes refused to pay Atlas Granite and terminated the contract on March 9, 2023.[8]

Atlas Granite registered a lien against the home on May 17, 2023.[9] Both parties agreed to an adjudication process under the PPCLA that resulted in Atlas Granite being awarded $12,775.29.[10]

The deadline to register a builders’ lien under the PPCLA is 60 days from the last day the services or materials were supplied.[11] Atlas Granite’s lien may have been filed outside of the 60-day window.[12] Welcomes Homes therefore served a Notice to Prove Lien to challenge the validity of the lien.[13]

The lien proceedings were stayed by consent pending an application for advice and direction from the Court regarding any impact the lien issues would have on the adjudicator’s earlier decision.[14] Specifically, advice and direction was sought in respect of: (i) whether the validity of an adjudicator’s decision depends on the validity of the underlying construction lien;[15] and (ii) whether an adjudicator’s decision is final and binding on the parties involved.[16]

In deciding the application, the Court observed that there is an inherent overlap between lien rights and contractual rights inasmuch as a dispute may involve both. However, adjudication is only available to contractual counterparties and not (for example) to a subcontractor claiming against an owner in the absence of a direct contract between them.[17] The determination of the validity of a lien is not something that would affect the outcome. The role of the adjudicator is to determine contractual rights, not lien rights.[18]

Section 33.6(5) of the PPCLA provides that an adjudicator’s determination is binding except where:

1. a court order is made in respect of the matter,
2. a party applies for a judicial review of the decision under section 33.7,
3. the parties have entered into a written agreement to appoint an arbitrator under the Arbitration Act, or
4. the parties have entered into a written agreement that resolves the matter.

Accordingly, the Court held that the adjudicator’s decision is final and binding except where displaced by a court order or judicial review.[19] It was not displaced by the issuance of a Notice to Prove Lien.[20]

Previous drafts of the PPCLA included language that an adjudicator’s decisions were “final and binding” on the parties,[21] but the legislation as enacted was changed to only say “binding” … except wherewith a list of exceptions. This is consistent with affording the courts and/or arbitrators the jurisdiction to review and/or consider afresh that which the adjudicator has decided provided the relevant statutory provision is engaged. Presumably, unless there is materially new evidence before the court or arbitrator and/or a patently unreasonable decision by the adjudicator, the court or arbitrator may be hesitant to displace the decision of the adjudicator, including to try to reinforce the efficacy of the PPCLA adjudication system providing an easier and quicker means of resolving underlying contractual claims. This also may help limit occasions where parties may otherwise attempt to do twice what should really only be done once in terms of putting their best evidentiary and argumentative positions forward in the first forum. This approach would also seem more consistent with preventing a multiplicity of actions as contemplated by section 8 of the Judicature Act, RSA 2000, c J-2.

In other Canadian provinces, including Ontario and Saskatchewan, the language used in the legislation is that an adjudicator’s determination is binding until a decision is made in litigation or arbitration, whereas Alberta uses “binding … except where”.[22] Given the differing statutory language in these other jurisdictions, and the lack of clarity on this point in Welcome Homes, it remains an open question to what degree an arbitrator or court may diverge from an adjudicator’s decision.

Welcome Homes did not assess the circumstances in which a court would make an order in respect of an adjudicator’s decision or consider a contract to arbitrate a dispute. The Court also did not mention the other two statutory exceptions where parties have entered into written agreements: (i) “to appoint an arbitrator under the Arbitration Act”;[23] or (ii) “that resolves the matter”.[24] Whether adjudication is binding in subsequent litigation or arbitration proceedings was not at issue in Welcome Homes. Additional judicial direction on the finality of adjudicator decisions may provide additional clarification and confirm whether the approach taken in Alberta will differ from other Canadian provinces.

As a final note, the PPCLA came into force on August 29, 2022, and included a transitional provision for existing contracts to become compliant with the PPCLA as described in the PPCLA Regulation.[25] With this two-year anniversary fast approaching, the deadline for all pre-existing contracts and subcontracts to be amended to conform with the PPCLA is only a few short weeks away. Watch for a bulletin in the future offering drafting suggestions for such contracts.

McMillan’s National Construction Group’s Alberta-based practitioners are well equipped to navigate Alberta’s PPCLA on behalf of any industry participants or affected parties.

[1] Welcome Homes Construction Inc v Atlas Granite Inc, 2024 ABKB 301 [Welcome Homes].
[2] Prompt Payment and Construction Lien Act, RSA 2000, c P-26.4 [PPCLA].
[3] Alberta’s Prompt Payment and Construction Lien Act in Force Since August 29, 2022: What You Need To Know (Consolidated).
[4] Prompt Payment and Adjudication Regulation, Alta Reg 23/2022 [PPCLA Regulation].
[5] Prompt Payment Rules for Construction Industry.
[6] Prompt Payment and Construction Lien (Prescribed Persons, Entities and Project Agreements) Regulation, Alta Reg 122/2023, schedule 1; PPCLA, supra note 2, s 32.1(6).
[7] Welcome Homes, supra note 1 at para 3.
[8] Welcome Homes, supra note 1 at para 3.
[9] Welcome Homes, supra note 1 at para 4.
[10] Welcome Homes, supra note 1 at para 6.
[11] PPCLA, supra note 2, s 41.
[12] Welcome Homes, supra note 1 at paras 8–9.
[13] Welcome Homes, supra note 1 at para 7.
[14] Welcome Homes, supra note 1 at para 7.
[15] Welcome Homes, supra note 1 at paras 24–26.
[16] Welcome Homes, supra note 1 at paras 19–23.
[17] Welcome Homes, supra note 1 at para 18.
[18] Welcome Homes, supra note 1 at para 26.
[19] Welcome Homes, supra note 1 at para 23.
[20] Welcome Homes, supra note 1 at para 26.
[21] Bill 37, Builders’ Lien (Prompt Payment) Amendment Act, 2020, 2nd Sess, 30th Leg, 2020.
[22] Construction Act, RSO 1990, c C.30, s 13.15(1); The Builders’ Lien (Prompt Payment) Amendment Act, SS 2019, c 2, s 21.52(1); PPCLA, supra note 2, s 33.6(5).
[23] PPCLA, supra note 2, s 33.6(5)(c).
[24] PPCLA, supra note 2, s 33.6(5)(d).
[25] PPCLA Regulation, supra note 4, s 37.

by Michael D. Briggs, KC; Jamieson D. Virgin; Preet Saini; Lena Clayton (Summer Law Student)

A Cautionary Note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2024