Despite being introduced in 2022, the Prompt Payment and Construction Lien Act (the “PPCLA”) has been the subject of little judicial consideration, especially in relation to the Adjudication process under Part 5.  The lack of judicial consideration can be explained by both: the transitional provisions of the PPCLA, whichallowed the former lien act to govern contracts entered into prior to August 29, 2022;^[1] and the fact that the adjudication process has yet to become a mainstream forum for resolving construction disputes.^[2] 

While we expect that adjudications will become much more common in the years to come, further clarity from the Province and the Judiciary would be a welcome development.  This article will summarize some issues with the current PPCLA, the Province’s proposed amendments in Bill 30, then address the little case law that has been released in relation to adjudications thus far. 

The Prompt Payment and Construction Lien Act and Bill 30

On November 4, 2024, the Alberta Government tabled Bill 30, the Service Alberta Statutes Amendment Act, 2024 (“Bill 30”), which proposes amendments to the PPCLA.^[3] Specifically, Bill 30 addresses when adjudications can be commenced, “clarifies” the definition of when a contract is “completed”, and allows an adjudicator’s determination to be binding even if it is under judicial review, arbitration, or litigation.^[4] As of the date of this article, Bill 30 has now passed its third reading.

When Adjudication can be Commenced

Pursuant to section 33.4(3) of the PPCLA, where an adjudication was commenced on the same day that a statement of claim was filed, the adjudication would not proceed.^[5] The practical result was that recipients of a notice of adjudication have attempted to “race to the courthouse” and file a statement of claim to avoid adjudication, attempting to frustrate the purpose of adjudication at its beginning.

Bill 30 amends section 33.4(3) so that where a statement of claim is filed the same day as the commencement of an adjudication,^[6] both the adjudication and the court action may proceed unless or until a court directs a stay of either the court action or the adjudication.

When a Contract is “Completed”

Under section 33.4(2) of the PPCLA, “An adjudication may not be commenced if the notice of adjudication is given after the date the contract or subcontract is completed, unless the parties to the adjudication agree otherwise.”^[7] The usage of the term “completed” resulted in parties experiencing significant confusion as to when exactly a contract is “completed”, as completion was not definitively defined. Was a contract completed upon issuance of a certificate of substantial completion? Was completion only attained when all contract work was completed? Did contract work include deficiencies and extras? Or, most generously, when both of the Parties obligations under the contract were completed, including all payment obligations? Parties to adjudication have become bogged down in this pre-adjudication issue, depriving certain parties of the benefit of a prompt resolution, and leading jurisdictional challenges.

Bill 30 amends section 33.4(2) to allow adjudication to begin 30 days after “Final Payment” under the contract;^[8] and defines “Final Payment” as the earlier of either:

(a) the date on which complete payment of the amount set out in the contract or subcontract, as applicable, is made, and

(b) the date on which complete payment of the amount set out in the contract or subcontract, as applicable, is required to be made under section 32.2, 32.3 or 32.5, as the case may be.^[9]

Judicial Review, Arbitration, and Litigation

Under the current PPCLA, section 33.6(5) provides that the determination of a matter by adjudication is binding, except where a party applies for judicial review of the determination, where the parties have entered a written agreement to appoint an arbitrator regarding the dispute, or where a court has made a court order regarding the determination.^[10] As a result, any determination made by an adjudicator becomes non-binding by arbitration, judicial review, or court order.

Bill 30 amends 33.6(5) of the PPCLA to make a determination binding, except where a court directs otherwise, where an arbitrator has been appointment and makes an award, or where the parties have entered into a written agreement that resolves the matter.^[11] The amendments of Bill 30 to section 33.6(5) significantly strengthen adjudicator’s determinations, as compared to the current PPCLA.

A note for Public Works

Bill 30 also amends the PPCLA to expand the application of adjudication to apply to public works, signaling a continuing shift in Alberta’s construction legislation to embrace adjudication.^[12]

Welcome Homes Construction Inc. v. Atlas Granite Inc.

Bill 30 provides much-needed clarity in relation to the foregoing issues and significantly strengthens the determinations of adjudicators; however, with the passage of time, we can also expect additional clarity from the Courts.  As of the date of this article, the Alberta Court of King’s Bench’s decision of Welcome Homes Construction Inc. v. Atlas Granite Inc., 2024 ABKB 301, stands alone in its consideration of the adjudication process in Alberta.^[13] We summarize the decision below:

Background

A dispute was born out of a contract between Welcome Homes Construction Inc. (“Welcome Homes”) and Atlas Granite Inc. (“Atlas Granite”) for the supply and install of marble countertops for a residential project. Disputes arose over the quality of work, leading Welcome Homes to stop payments and eventually terminate the contract. Atlas Granite responded by filing a lien against the project. Both parties then turned to adjudication under the PPCLA, resulting in a decision favoring Atlas Granite. Following the adjudicator’s decision, a notice to prove lien was served on Atlas, prompting the parties to seek advice and direction from the Court.

Key Findings

The Court made two crucial findings that affect how the adjudication process operates under the PPCLA:

• Scope of Adjudication – Contractual Rights/Relationships

The Court clarified that adjudication under the PPCLA focuses exclusively on settling disputes related to contracts, and not on issues related to lien rights. This means adjudication is only available between parties who have a direct contractual relationship. Adjudication does not apply to disputes solely based on lien rights between subcontractors and project owners.

• Finality of Decisions – Differences in Interpretation

Unlike Ontario’s interpretation, where adjudication decisions are viewed as interim until further legal action, in Alberta, the Court held that adjudicator’s decisions are “final and binding,” unless challenged or varied through Court orders, judicial review, arbitration, or by mutual agreement of the parties.

Key Takeaways

From the Court’s decision in Welcome Homes v. Atlas Granite, three important lessons emerge:

• Efficiency in Alberta: For those eligible in Alberta, adjudication offers a faster and more cost-effective path to resolve disputes compared to traditional court proceedings;
• Limits of Adjudication: The ruling limits the use of adjudication to disputes between parties with direct contracts. This means, parties who hold liens but lack direct contractual claims, such as subcontractors relying solely on lien rights, may find adjudication less applicable, needing to seek resolution through the courts; and
• Future Developments: Ongoing legal interpretations and legislative amendments will continue to shape how adjudication operates under PPCLA, impacting construction industry practices in Alberta

Conclusion

The Welcome Homes v. Atlas Granite decision provides foundational clarity on how construction disputes are managed under Alberta’s PPCLA. It underscores the importance of understanding the specific scope and limitations of adjudication for stakeholders in the construction sector.

For those navigating construction disputes in Alberta, staying informed about legal developments and decisions, like Bill 30 and Welcome Homes, is crucial to ensure you are appraised of the changing construction litigation landscape and how you, or other parties, can pursue claims.

For further details or specific inquiries please contact:

Locklyn E. Price, Partner
Email: lprice@walshlaw.ca
Telephone: 403.267.8440

Or

Chad Erisman, Associate
Email: cerisman@walshlaw.ca
Telephone: 403.267.8481

[1] Prompt Payment and Construction Lien Act, RSA 2000, c P-26.4 [PPCLA].
[2] ARCANA Alberta Annual Report at p 8.
[3] The Legislative Assembly of Alberta Bill 30, Service Alberta Statutes Amendment Act, 2024 [Bill 30].
[4] Bill 30.
[5] PPCLA, s. 33.4(3).
[6] Bill 30, at p 24.
[7] PPCLA s 33.4(2).
[8] Bill 30, at p 24-25.
[9] Ibid.
[10] PPCLA s 33.6(5).
[11] Bill 30, at p 26.
[12] Bill 30, at p 31.
[13] Welcome Homes Construction Inc v Atlas Granite Inc, 2024 ABKB 301.