Canada: Your Payment Rights on Provincial Construction Projects
If you are furnishing to a construction project in Canada, you follow steps to secure mechanic’s lien or bond claim rights, much like you would when furnishing to a project in the United States. Construction projects in Canada will likely fall in to one of three categories: private, provincial crown/government, or federal crown/government.
- Private: improvement contracted by a private entity, e.g., a person, company, or corporation
- Provincial Crown: improvement of public works or building under formal contract made by Provincial government
- Federal Crown: a contract for construction, alteration, or repair of any public building or public work of the Canadian government
What is a Provincial Project?
A provincial project is the improvement of public works or building under formal contract made by the provincial government. The provincial government is the equivalent to state government in the U.S.; where the U.S. has 50 states, Canada has 13 provinces.
Often, construction claims on provincial projects are recovered via a Labour & Material Bond, which is a payment bond.
Labour & Material Bond: A surety bond, particularly on public projects, issued as assurance of payment to certain parties should the principal of the bond breach their construction contract.
Currently, only 2 provinces have payment bond requirements for provincial projects: New Brunswick and Ontario.
- New Brunswick: On Crown Construction contracts of $500,000.00 or more, a bid bond and a payment bond will be required. On Crown Construction contracts less than $500,000.00, a bid bond and a payment bond may be required.
- Ontario: generally, payment bonds are required for general contracts of $500,000.00 or more.
We are watching proposed legislation in other provinces where payment bonds may soon be statutorily required on provincial projects.
No Payment Bond? File a Public Works Act Claim
Different than a bond claim, a Public Works Act Claim (public improvement lien) is a claim served upon the provincial crown, in which the public entity may pay the claimant directly from funds owed to the prime contractor. The public improvement lien is available in the following provinces:
- New Brunswick
- Nova Scotia
How Can the Public Works Act / Public Improvement Lien Help in the Event of Bankruptcy?
In his article, Doing Work on a Provincial Project? Protect Yourself with a Public Works Act Claim, author Anthony Burden reviewed a recent case before the Alberta Bankruptcy Court. You can read his article in full for the details, but ultimately the bankruptcy court declared a claimant’s Public Works Act claim took priority over unsecured claims and the claimant received payment in full.
“The Court lifted the automatic stay to allow funds to be paid out of Court to… its sub-subcontractors, in the amount of their proven claims. This was done without a formal Order approving the BIA Proposal by [debtor]. Despite [debtor’s] insolvency, its sub-subcontractors were able to receive full payment for their debt claims and were not required to share pro-rata.”