THE STANDING SENATE COMMITTEE ON BANKING, TRADE AND COMMERCE
EVIDENCE
OTTAWA, Wednesday, March 29, 2017
The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill S-224, An Act respecting payments made under construction contracts, met this day at 4:15 p.m. to give consideration to the bill; and to study the current and emerging issues of the banking sector and monetary policy of the United States (consideration of a draft budget).
Senator David Tkachuk (Chair) in the chair.
[English]
The Chair: Good afternoon and welcome colleagues, members of the general public who are following today's proceedings of the Standing Senate Committee on Banking, Trade and Commerce, either here in the room or listening via the Web. My name is David Tkachuk, and I'm the chair of this committee. Today, we are continuing our examination of Bill S-224, An Act respecting payments made under construction contracts. The bill was read a first time in the Senate on April 13, 2016, and referred to our committee on November 28, 2016.
Honourable senators, as you know, we are now at a stage where we will begin going through the bill clause by clause. Before we do, I would like to remind senators of a few points in terms of the mechanics of the process. When more than one amendment is proposed to be moved in a clause, amendments should be proposed in the order of the lines of the clause. Some amendments that are moved may have consequential effects on other parts of the bill. We will endeavour to keep track of these. Should amendments be moved this afternoon, with no notice, please keep in mind that there may be no preliminary analysis of the amendments. So if any member wishes to propose an amendment, please allow your colleagues and our staff sufficient time to review them before opening up the floor for debate.
Finally, I wish to remind senators that, if there is any uncertainty as to the results of a voice vote, the most effective route is to request a roll call, which obviously provides unambiguous results. Senators are aware that any tied votes negate the motion in question.
Now, we have before us, of course, Senator Plett's motions, which we had presented to us quite some time ago, and that is the reason we're having our clause-by-clause debate today. In the meantime, on Monday night, senators, we received amendments from Senator Massicotte that I think came in at the eleventh hour. There are 15 of them. My understanding is — and you can correct me, Senator Massicotte, if I'm not correct — is that they have not been reviewed by the Law Clerk's Office, which makes it a problem for us to consider them. They need to be reviewed by the law clerk to ensure there are no inconsistencies between the French and English versions of an amendment. The law clerk would also ensure that any of these new amendments do not have a consequential impact on other parts of the bill. He would also have to assure us that Senator Plett's amendments, which have been reviewed by the law clerk, don't have coordinating or consequential impacts on Senator Massicotte's proposed amendments.
What I'm going to suggest, Senator Massicotte, for us to move forward on this bill with some organization and with responsibility to the public that we present a bill that is as good a bill as we can present, that you withhold your amendments and that we move forward with clause-by-clause consideration without them. And, upon review of them by the law clerk, Senator Massicotte, you can propose them at report stage or at third reading.
Everyone in favour of that? Debate?
Senator Massicotte: Obviously, I'm not in favour of that at all. The Rules of the Senate are very clear. You don't need to get prequalification or approval of some legal department to propose amendments. In fact, I have proposed amendments in the past, even verbally, and nobody has ever said, “You can't consider those because you didn't go through this bureaucratic process.” The legal department was not in a position to provide me with the total of their opinion. They were recommending that I present amendments subject to their further review, subject to many conditions that I'm convinced wouldn't have been acceptable at this committee. I, therefore, proceeded to prepare the amendments as I saw fit. For me to go to third reading or to delay it I think is inappropriate. I would like this committee to either accept or refuse the amendments. It's for this committee to decide that. That is what the Senate expects from us.
The Chair: You realize you're contradicting the very argument you made on Senator Plett's amendments, which was that we didn't have enough time to look at them and consider them.
Senator Massicotte: I appreciate the issue.
The Chair: You brought these in Monday night.
Senator Massicotte: I appreciate your time, and I spoke to Senator Plett today. If the committee were prepared to give it to us — in fact, I know there are some other corrections that we could maybe make, semantic — I would like more time, but I understood this committee was not prepared to give more time.
The Chair: No.
Senator Massicotte: So I'm stuck. Therefore, that's why I did what I did, without the final approval of the legal department, which, I think, does not nullify the amendments. It's for this committee to accept the amendments or not.
The Chair: Okay. Did you contact my office about getting more time, Senator Massicotte?
Senator Massicotte: No, but, at the last meeting, you remember how difficult it was to get more time, in spite of the fact that we received documents at the last minute.
The Chair: Yes.
Senator Massicotte: But you and others felt we didn't need more time.
The Chair: Exactly.
Senator Massicotte: Therefore, the feeling was very clear; it was my sense that more time would not have been acceptable.
The Chair: Senator Black?
Senator Black: Well, Mr. Chair, my position really hasn't changed from two or three weeks or so ago. My mandate is to do the best job that I possibly can on any particular bill. Whether we have a discussion today or Thursday morning, I can't possibly imagine what it matters. There are problems with the bill that has been put forward by Senator Plett. For us to sit here and willingly and knowingly pass that and basically kick the ball down the track doesn't strike me as responsible. I think that if, for some reason, we figure that — I like to hear that lawyers have this kind of power — if we determine that the lawyer has the power to not allow us to bring this forward this time, I think we just move it until Thursday or next Tuesday. What is the rush here? I don't understand this.
The Chair: Senator Black, I don't think there has been a rush. We had agreement of the whole committee to have clause by clause today. No one made that up. We all agreed to it. So we came in here to do clause by clause. We didn't make this up. There wasn't a one-person decision, Senator Black. It was the decision of the whole committee.
Senator Black: I agree with that.
The Chair: That's what happened. That's why we're meeting here today, not because there is a rush but because we have finished our business. We have reviewed the testimony. We had agreed to have Senator Plett present his amendments today, which he is going to and is prepared to do. I am asking Senator Massicotte to consider the work of the committee. You can make further amendments, Senator Massicotte, at third reading. If you wish to pursue and push this matter, I really can't do too much about that, but it's going to make it — I would like the law clerk maybe to comment on some of the problems that we're going to have by not having these things cleared, first of all. We invited the law clerk, Mr. Bédard, to be here. Perhaps Parliamentary Counsel can give us a hand as to what these mean. Then, Senator Greene, we'll go to you.
Michel Bédard, Parliamentary Counsel, Office of the Law Clerk and Parliamentary Counsel, Senate of Canada: We received the document at the same time as the committee members received it, so we did not prepare any motion in amendment as we usually do for motions to amend bills. We didn't have that opportunity. I understand and, of course, respect the privileges of senators to move amendments orally, during the study of a bill. When we do prepare amendments, we go through a process, so sometimes we will receive a draft and we work with the senator's office and the senator to specify the intent of the amendment, the meaning, making sure that the French and English are consistent, making sure that the terminology used in the amendment is consistent with federal laws.
In this case, since we were not asked to prepare motions in amendment, we did not do that, and we didn't do a deep analysis of the document, but just a prima facie analysis. There are some issues with the amendments.
I could give some examples. I don't know if you want to deal with the document as a whole or when each clause is called, but there are some terms that are not used in federal statutes. For example, “higher court.” It's unclear to what it refers. If the law clerk's office had the opportunity to examine the amendment beforehand, we could have had the discussion with the office and provide the text that is in conformity with federal drafting conventions and standards.
There are also other examples.
Senator Wallin: Just out of interest, what do you usually say if not “higher court”?
Mr. Bédard: First of all, we will clarify what the intention is of the senator. “Higher court” I suspect is a reference to a Superior Court of a province, so this is what we will probably have written. But then we need to engage in the conversation with the senator to know the intent. In the document, there is redundancy in terms of the concept or use, and I believe they are based on the premise that Senator Plett's amendment will have been passed. Some of the amendments are subamendments, while some of the changes proposed are amendments, we have to go through the full documents to know the nature of what they are, amendments or subamendments. This is one issue.
There are also issues between the French and the English. I know the text is using the concept of major work or major repair or significant repair. Well, it's not clear what “major” refers to. This needs to be discussed with the client. Maybe “major” can be defined. Maybe it's not appropriate. Maybe it's a threshold in terms of the amount for the improvement.
I know that when you receive a motion sometimes it is only two lines, and it seems pretty straightforward. But there is a lot of work involved behind the scenes to make sure the text in both official languages is consistent with federal drafting standards.
Senator Campbell: Obviously, we have a variety of opinions around this table. We have been here before. It seems like the last meeting, where we have been here, and we had the same discussion, and some people did not want to put it off. We put it off so that we could have amendments put forward by Senator Plett.
I think it's time to move forward. I appreciate the work that Senator Massicotte has done. My suggestion would be much the same as the chair's, that we proceed to clause by clause. We allow Senator Massicotte to have his amendments looked at by the law clerk and have the time to look at it both from the French and English translation, as well as what a “high court” is and all the other nuances that they have, and that he introduce them at third reading. Then the whole Senate has an opportunity to see what we have done here, and what we have from Senator Massicotte.
If we keep putting this off, we're never going to get to a decision. Thank you.
Senator Greene: As Don knows, I have always liked the intent of the bill, but this bill has been amended so many times, it's become one of the most amended little bills that I have dealt with since we have been here. The order in which we tackle the amendments and the bill is important to me because the order affects how I will vote. For example, from what I know of Senator Massicotte's amendments, which I have read carefully, I tend to like them. To me, they make the bill better.
If they are not part of the bill that we deal with today, I may not want to support it. I may not vote against it, I may just abstain, but I may not want to support it. If they are part of the bill we deal with today, to me, they make the bill stronger, and I probably will support it.
Senator Wallin: Following up on Senator Black's point, I'm in agreement with that. I don't think it's a good idea for us, when we're having a battle of some description, to just take it to the chamber at that point. We do have an obligation to get it in better shape.
Is there a compromise that we go through clause by clause, then we stop before a final vote? Under procedure, I think you can sign off on some clauses, but there is a final vote that has to take place. Is that true?
Lynn Gordon, Clerk of the Committee: To adopt the bill.
Senator Wallin: If we went through the early stages so that we kept things in order so that Senator Plett's bill was there, and then we took it to a certain point, then stopped — it might take us another day — give the law clerk some time to look, and then to satisfy Senator Greene's position, then look at those amendments to get us to that final stage, but we will have made some progress by moving through on the first stage.
I don't know if that's doable, but it would satisfy me that we're not sending what clearly is a flawed bill, in people's mind, to the floor to do battle there. We're the ones that have been looking at this; we should take the responsibility to fix it.
Senator Plett: Senator Greene says this is the most amended bill that he has ever seen. We haven't amended this bill yet. I have a bunch of draft amendments that we are planning on proposing today; so I'm not sure why he says this is the most amended bill. It has yet to be amended.
I have a number of very good amendments, and I'm hoping they that will be passed. People are saying that we want the very best bill we can get, and we don't have the best bill we can get with these amendments. Well, of course, we can all have our opinions on that. My opinion is different. I believe when we put these amendments forward, we will have a very good bill.
Again, Senator Greene says he likes Senator Massicotte's amendments. The fact of the matter is that Senator Massicotte has personally been in contact with Geza Banfai, I believe, and talked to him. That is the lawyer representing the trade contractors, who basically says these amendments gut the bill. They do not just amend; they make major and significant changes that are very detrimental to this bill. So where this bill gets better with this, I'm not sure.
Colleagues, most of us have been here for a few years. It is not uncommon, as Senator Campbell and the chair have suggested, for amendments to come forward at report stage or at third reading. Earlier today, I offered to Senator Massicotte that I would be prepared to work with him and bring in the trade contractor's lawyer, sit down with him and see if we can't reach a compromise that we could support some of his amendments at third reading. I'm happy to do that.
I want a bill to pass. I want the best possible bill. We heard from 22 or 23 witnesses. The only witnesses we have heard opposing this bill are the two witnesses who don't want to pay their bills. Everyone else was supporting this bill. Again, as Senator Campbell said, you asked for us to do certain things, and we did those things. It took a considerable amount of time, and I thank you for your patience in that.
Senator Massicotte then took my amendments — and I'm looking at them; they say “confidential” — took those confidential documents, sent them out in the public, sent them to Reynolds and Vogel and asked for an opinion, and the opinion that Reynolds and Vogel gave Senator Massicotte is: You should deal with Mr. Banfai, who is “an expert in his own right.” Mr. Banfai says this is a good bill, and what Senator Massicotte is now suggesting is very detrimental to the bill — not all of his amendments, but a few of them, very detrimental.
Again, colleagues, my preference is clear. However, Mr. Chair, I'm not sure how we resolve this. I tried last week when Senator Massicotte let my office know that he was dealing with amendments and asked if we could send him certain information. I reached out to him at that point and said, “Could we have a conversation?” And that conversation was not forthcoming.
So here we are, Monday at 5, we received this document; and either we deal with those today or we have another delay. We have Easter break coming along. For some reason, colleagues who are now saying, “What's the hurry, what's the rush?” have been asking me and others to speak on certain bills, saying they're a tremendous rush.
I'll wrap up with this, chair. For the sake of agreement here, let's deal with what we have in front of us, what the law clerks have drafted, what we have drafted, and deal with that today. I commit to everybody here to work with Senator Massicotte in finding out whether there isn't some way that, in his opinion and Senator Greene's opinion, makes the bill better; maybe we can, and then we could support that at third reading.
The Chair: I think I have a good idea of how I want to proceed with this, and we'll go from there.
Senator Tannas: I'm in agreement with Senator Campbell and others, and I would just add that I've done my best to try to understand Senator Massicotte's amendments. I do think that they substantially alter the intention of the bill. I think that when those kinds of situations come up, the very best place for it — and I had my own personal situation with Bill C-4, where, rather than try to do it at committee, if there is a real altering of the bill, that that case needs to be presented to the Senate. Otherwise, it's too easy to, on a day like this, catch the wrong people in the committee room and wind up with an odd recommendation one way or the other. To me, what Senator Massicotte's changes do, as Senator Plett said, is go a long way towards gutting the bill. To me, I think it would be good form.
We all know there's a problem. We had men in tears here talking about the problem. As Senator Plett said, the only folks who didn't think there was a problem were the people in charge of paying their bills. The people who were in charge of doing the work and getting paid were the ones who said there was a problem and paraded in here. We could have had days and days more, I'm convinced. There is a problem here.
I think we should move forward. I've looked at Senator Plett's amendments. I think he has gone a long way to work to accommodate the concerns that were presented. Then I would like to look very closely and debate Senator Massicotte's amendments in the Senate. I think it will be a good debate, but it will be on the substance of it. That's my feeling, chair.
Senator Ringuette: I think it was in front of the Senate for second reading for almost a year. I spoke in the Senate Chamber, indicating to Senator Plett that I wanted to see amendments and that I wanted to see the arbitration process happen, because the objective here is for the people who do the work, who supply the material and so forth, subcontractors, are being paid. That's the objective of the bill. Senator Plett has listened and the amendments that he has put forth do exactly what I wanted to say. If we're waiting to have a perfect bill, I think each and every one of us will be retired by that time.
Senator Massicotte, I didn't have the time to look at what you're proposing because I got it Monday night.
The other thing is that we've postponed clause-by-clause consideration for a month now. We've already postponed clause-by-clause consideration. I've never been in a committee where scheduled clause-by-clause examination was postponed, not in 14 years, in the committees I've been on. Colleagues, yesterday was a very important event at home. I got up at 3 a.m. this morning. I was on the road at 4 a.m. to come here to make sure that we do justice to the subcontractors. Please, let's do what we were supposed to do a month ago and go ahead and proceed to clause by clause.
Senator Massicotte, if you feel very strongly about your amendments, we can look at them at third reading.
Senator Massicotte: I think I have a right, and it's normal, that I ask this committee to review the amendments with an open mind. There are some that are important. I think it's important enough that I would not support the bill. I certainly have the right to do it at third reading, but also at the committee. If this committee is going to recommend to the Senate to approve the bill, that's a very important recommendation. That is our responsibility. I would like this committee to consider the amendments I proposed, and I'll highlight why I think those amendments are required. If the committee says no to those, I have no problem with those, because it's a question of a judgment call. If the committee wants to do clause-by-clause examination including my amendments, but make it subject to a legal review at the end, that would also be okay with me, because documents can always be perfected in a sense. But I think I would like to discuss the essence of the improvements that I am proposing and to see if you agree with me.
The Chair: Here's what we're going to do. We're going to proceed to clause-by-clause examination. As a senator who has been here for 24 years, one, I have never seen this situation before. But second, I have a lot of reservations in saying that a senator cannot move an amendment during clause-by-clause. There is the question of what I think historically and legally is — not legally, but I think morally — the right procedure. I was hoping that Senator Massicotte would not force this on us, but it seems Senator Massicotte wants to.
We've got lots of work to do, so let's get busy. It's a quarter to, and we're going to clause-by-clause consideration of the bill.
Is it agreed that the committee proceed to clause-by-clause consideration of Bill S-224, An Act respecting payments made under construction contracts?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall the title stand postponed? Agreed?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall clause 1, which contains the short title, stand postponed? Agreed?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall clause 2 carry?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall clause 3 carry?
Senator Plett.
Senator Plett: Thank you, chair. I have an amendment as follows:
THAT Bill S-224 be amended in clause 3, on page 2, by replacing lines 37 and 38 with the following:
“milestone means the point in time provided for in a construction contract for the submission of a payment application when a specified portion of the construction work is complete or a specified period of time, greater than one month, is reached. (étape)”.
The Chair: Agreed?
Hon. Senators: Agreed.
Senator Massicotte: I also have an amendment for this section.
The Chair: Clause 3?
Senator Massicotte: I think it’s clause 3, relative to the word “improvements.” Here's my problem. The improvement as worded, it says “any alteration, addition, maintenance, restoration or repair” — that means the lawn maintenance guy gets caught up in this bill because it refers to any maintenance. If you call the electrician or call Hydro-Québec, it's a repair at the line. I don't think the intention of this bill is to cover the lawn maintenance guy or the cleaning man or woman. I think it's far too broad in that respect and I'm quite sure that was not the intent of the bill. I would propose an amendment to paragraph (a) to say “major.” The intent is “significant.” The legal people are saying it lacks definition. If you want, you can say “major” and in parentheses, “at a cost of a minimum,” closed parentheses.
The Chair: Would you clarify exactly where you are, Paul?
Senator Massicotte: The word “improvement.”
The Chair: What page of the bill?
Senator Massicotte: Page 2 of the bill. Look at the word (a), for instance.
The Chair: “any alteration, addition, maintenance . . .”
Senator Massicotte: It includes the word “maintenance” and “repair.” I have a problem with those two words. I would have changed the intent to be of major alteration or addition. It can't just be putting up a fence. It can't just be cleaning the lawn. I’ll hear anybody else's recommendation how to get there, but I'm quite sure the intent of the bill is not to cover regular maintenance.
Senator Plett: First, chair, let me start off by saying that, again, to adopt an amendment such as this — and I will probably use at least this line on every one of these amendments — is that the trades, the people Senator Ringuette was talking about, the lawyers for these trades, nobody has had a chance to weigh in on these particular amendments and this particular amendment as to the repercussion of this amendment. Certainly, I am for that reason, and that reason alone, prepared to vote against.
However, I do want to say this as well. The introduction of “major” and “significant” in the definition of “improvement,” coupled with “minor” in the exclusion section of 5, the intent seems to have the legislation apply only to major work and exempt minor repairs. So there are two concerns. Number one, “major,” “substantial” and “minor” are not defined and there will certainly be litigation, without a doubt, over these terms as courts seek to put parameters around those concepts.
More fundamentally, it is difficult to see the principle justifying the exclusion of minor works from the scope of the legislation. Simply put, chair, why should those people who provide minor works not be entitled to the same protections of prompt payment and adjudication that those of other projects — it could be argued with equal fervour that minor works perhaps deserve these protections more than major ones, since the cost of enforcing payment obligations and resolving disputes in minor projects using the existing remedy litigation are often disproportionately high compared to the amounts in issue, leaving unpaid contractors with no effective remedy at all.
We see this already, chair, in the lien remedies that are available across the country. Many contractors and subcontractors who are owed relatively small amounts will simply write them off rather than pursue a lien because the cost and complexity of doing so will equal or exceed the amount in issue. So to take “minor” out of here and have only major works leads to lawsuits forever.
Senator Tannas: We actually had some testimony on this, if you remember. They were talking about some company that specializes, if you're a building owner, in managing all of these contracts. There was some significant testimony around smaller contractors, cleaners, lawn guys, et cetera, who were not getting treated fairly, and that this large management company was clearly working with a float, working the float. So, to me, I get the intention of Senator Massicotte's amendment, but —
Senator Ringuette: Without talking with Senator Tannas, I agree, because we have to understand how the federal process works. The federal process works that they will come out with a general tender for all air conditioning or heating systems for the next two years, or they will come out with a relocation contract that is more in the news in the last few years, and that general contractor will give it to —
I understand, Senator Massicotte, what you want to do with regard to “major,” but as far as I know, every federal contract is major, because they lump all kinds of work throughout the country, by the way, and the general contractor will hire a subcontractor in Nova Scotia to do the work in Nova Scotia, and do the same in New Brunswick. They will hire a subcontractor in New Brunswick to do that. We're still talking about the general contractor working here and not paying the subcontractors.
The Chair: If there's no further debate, I'm going to ask everybody to raise their hands and then we'll quickly count. Then if someone wants a recorded vote, we can record it.
Senator Massicotte: I heard the comments and I'm prepared to withdraw my amendment.
The Chair: Okay. We're done with clause 3.
Senator Plett: No, we're not, chair.
The Chair: Another amendment on clause 3? Sorry. I called clause 3 and I didn't hear anybody.
Senator Day: You asked if we agree to the milestone.
The Chair: Yes.
Senator Day: So now that clause has been amended.
The Chair: We have another amendment, I understand.
Senator Day: You didn't ask if we accepted the clause as amended. You understand that?
The Chair: I understand that. Sorry.
Senator Plett: I think you will do that when I —
The Chair: Your second amendment.
Thanks, Senator Day.
Senator Plett: I move:
THAT Bill S-224 be amended in clause 3, on page 3, by replacing line 6 with the following:
“request for payment that meets the requirements for submission and content set out in a construction contract. (demande de paiement).”.
Clause 3, page 3, replacing line 6.
The Chair: Agreed?
Hon. Senators: Agreed.
The Chair: Agreed. Now, are there any more amendments to clause 3? If no further amendments, shall clause 3 be carried as amended?
Hon. Senators: Agreed.
The Chair: Agreed.
We're going to go to clause 4.
Shall clause 4 carry, or do we have amendments to clause 4? Take your time. There's no rush here. We want to get things right.
Senator Massicotte, you don't have any?
Senator Massicotte: No.
The Chair: Shall clause 4 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 5 carry?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall clause 6 carry?
Hon. Senators: Agreed.
The Chair: Agreed. Shall clause 7 carry?
Senator Plett: I have a —
The Chair: We have two amendments.
Senator Plett: Yes. I move:
THAT Bill S-224 be amended in clause 7, on page 4, by replacing lines 15 to 17 with the following:
“on or before the 20th day following the approval or certification of the contractor's payment application.”.
The Chair: All in favour?
Senator Massicotte: Hold on.
The Chair: I'm just asking on this amendment, do you have a subamendment to the amendment?
Senator Massicotte: With all of his amendments, I presume I have no problem. I just want to make sure what line is affected.
The Chair: Take your time.
Senator Massicotte: Lines 15 to —
Senator Plett: Sorry, I put it away already. Lines 15 to 17.
Senator Massicotte: What number, when you look at the page of amendments, what number is that?
Senator Plett: It's —
The Chair: Clause 7.
Senator Plett: Clause 7 on page 4.
Senator Massicotte: I'm okay with that.
The Chair: All agreed?
Senator Massicotte: Read that amendment, but I have an amendment for paragraph 7(1).
The Chair: Wait a minute now.
Senator Ringuette: Should have done that first.
Senator Massicotte: I didn't know I had an amendment, but we jumped into it.
The Chair: We're dealing with Senator Plett's amendment, right? We are. We are dealing with Senator Plett's amendment, and then we will go to Senator Massicotte, right?
So, for Senator Plett's amendment, is everyone in agreement?
Hon. Senators: Agreed.
Senator Massicotte: Where I'm coming from, I'm trying to see the amendment — Senator Plett is thinking he's seeing it. I fully accept the doctrine of the Ontario model. They had a study group, as you know. They met everybody, they learnt everybody's opinion and they considered everybody's opinion. One of the key principles we're saying all the time is that we should not interfere in market conditions, people negotiating whatever the terms are, price, time or whatever. It is not for us to dictate those conditions.
I'm proposing to 7(1) to basically start the paragraph saying “unless otherwise specified in a construction contract, a government institution” so on and so on. If the party has agreed to whatever, it is whatever that dictates. It is not for us by legislation to impose payment terms or condition terms. If people agree, they agree.
For instance you have a lot of leasebacks, where you bill the government. They don't pay every month; they pay you 30 years from now, over the life of the very long lease. If you do a PPP, public-private partnership, again the conditions are different. The parties should be free to negotiate whatever conditions they so exercise. Let the market dictate.
I'm saying if there is a contract in there and it dictates those terms, that should dictate, not us, imposing payment terms or whatever conditions to it.
Therefore, what I'm proposing with paragraph 7 is to say “unless otherwise certified construction contract” then it goes on in paragraph 2. The wording is “when they submit an invoice, they could submit an invoice to the government institution or the payment supplier.” Frankly, it should be to both. So we should take the word “or” and put in “and.” The person who pays has the right to receive the invoice, not call up the Arctic and say, “Have you received the invoice?”
It's minor but it's important that the contractor or the owner should receive a copy of the invoice. Those are the two amendments I'm proposing.
Senator Plett: Senator Massicotte — and I'm sure this was simply a mistake on your part — it does not say “certified;” it says “specified.” I'm sure that was just an error.
Senator Massicotte: Should be “specified.”
Senator Plett: Let me tell you, colleagues, we consider this as probably — again, in the short period of time that we have done this — and I will simply say that one of my concerns is the same as the previous one — not having been read by the law clerk properly. Not having been read by any of the contractors affected. No legal people have had a chance to weigh in on the repercussions. No contract lawyers have had an opportunity to review this.
However, this is one of the most problematic of all the proposed amendments. Senator Massicotte says it's minor. By allowing contractual variation of a stipulated payment term, the very purpose of the bill is gutted. With respect, it appears that Senator Massicotte simply doesn't accept a key underlying principle of the bill, without which it would be rendered ineffectual, that contractual freedoms have to be constrained to the limited extent provided in order to achieve the objectives of the legislation: timely payment of the construction accounts. If parties entering into construction contracts could provide for any payment terms whatsoever, they will do so. The issues of inequality of bargaining power — we have heard that with witnesses here — and the underlying market failure that have resulted in the current problems of extended payments will be left unaddressed. We will have effectively achieved little or nothing.
It is worth noting, since Reynolds was mentioned again, that the Reynolds report itself concludes that while parties should be free to negotiate invoicing terms, when and how invoices are to be rendered, they must pay these invoices effectively on a monthly basis. That is the Reynolds report. That is what this report says. To change it in here that people can decide — they can write their own contracts — the large general contractor is sitting there in front of me — the small plumbing contractor — and he says, “You want this job done? Sign this contract.” That's wrong, and that's what this would do.
The Chair: Any other further discussion?
Senator Ringuette: As I reiterated, I've read many times the Ontario expert doctrine that I have with me. Their recommendation is very specific. They say, “Sure, let the contractors agree by timelines and payment times and invoicing times and forth.” However, we recommend that the legislation has at least a benchmark, like any other legislation. There is a benchmark, and then if the people entering into a contract want to have better conditions, then they are able to negotiate that. But at least in the legislation, you need a benchmark in regard to time frame.
I'm trying to find it quickly in the recommendation from the expert — 97. It says here: “It is usual practice in prompt payment regimes to allow parties to set appropriate terms in their contracts that will describe when the parties are entitled to render an invoice. However, we recommend that parties be free to contract in respect of payment terms, but that if they fail to do so, monthly payment terms should be applied.”
Senator Massicotte: I agree with that completely.
Senator Ringuette: That's in the expert . . . .
The Chair: Senator Ringuette, I didn't mean to rush you. Did you have anything else?
Senator Ringuette: I think I made my point in regard to —
The Chair: Just for clarity, so we know exactly what the motion is, I'm trying to keep this — we're trying to be organized, not only with our paper here, but also with what they are recording down there. Would you just repeat your motion Senator Massicotte?
Senator Massicotte: I propose that paragraph 7 reads as I —
The Chair: Clause 7?
Senator Massicotte: Clause 7. I move the following:
7 (1) Unless otherwise specified in the construction contract, a government institution must make progress payments to a contractor for construction work on a monthly basis.
Then I go on in paragraph 2 of clause 7.
The Chair: On your piece of paper, “or at shorter intervals.” You're scratching all that?
Senator Massicotte: Yes, obviously you are covered by the introduction. Monthly payment — you want me to read the full amendment. Monthly payment — the fourth line, I add the word “and” as opposed to “or” to make sure the government institution does receive a copy of the invoice. It'd be very unusual for them not to do so. Paragraph 3, I'm adding the words “unless otherwise specified in a construction contract, a government institution must pay following —”
Senator Ringuette: They are already —
The Chair: We already adopted 3. Didn't we? We just —
Ms. Gordon: There was already an amendment to 3.
The Chair: And we adopted it, so we're done that.
Senator Black, you had —
Senator Black: I do. Thank you very much. I will be quick. I'm working from the premise that from my point of view, the Reynolds and Vogel report, which is going to be the model for Ontario legislation, is where I want to get us to. Cards on the table: That's where I want to get us to.
I would simply point out that Senator Massicotte's proposed amendment in clause 7 is dead-on consistent with what the Reynolds and Vogel folks are recommending, and will be recommending to Ontario.
The Chair: Any further discussion? Senator Plett? Senator Day?
Senator Plett: I'm not sure whether Senator Black was inferring that this is what Reynolds says, because they are misrepresenting Reynolds. Reynolds says parties should agree to invoicing terms, not to writing a contract as to their terms. This is invoicing terms. It's a completely different thing. Here, this says “unless otherwise specified in the construction contract.” Construction contracts can be manipulated. The big guy manipulates the little guy. It's that simple and we were told that here over and over again. We cannot stare down the big contractor because we don't want to be struck from his bidder's list. We need to be protected by legislation.
The Chair: Senator Day?
Senator Day: This is on procedure. You said we have already adopted 7(3), and therefore we can't consider Senator Massicotte. I'm a little —
The Chair: I didn't say that.
Senator Day: What did you mean?
The Chair: We did adopt clause 3, as amended.
Senator Day: That's the point I'm making.
Senator Tannas: Clause 7 now.
Senator Day: 7(3)? Okay, we adopted that. Senator Massicotte had his hand up and Senator Plett had his hand up to at the same time. We went to Senator Plett and adopted it so we didn't get a chance to hear from Senator Massicotte. I think it's important in process that you go to the sub-clauses one at a time. Any amendments here? Any amendments there? You went to 7(3) and are now precluding comment on Senator Massicotte with respect to that 7(3). Are you with me?
Senator Massicotte: I made it very clear in the amendments when we said, “Let's deal with Senator Plett's, and we'll let you come back to yours.” It's not a slam dunk. That should not prohibit me from suggesting what I wanted to propose initially to paragraph 3.
Senator Day: Clause sub 3.
Senator Ringuette: Okay.
Senator Day: It's a process matter, but it can be solved if you go through each sub-portion of the paragraph at a time.
The Chair: We'll try to do that.
Senator Day: Now we have the problem with respect to Senator Massicotte and this clause 7(3).
The Chair: Senator Massicotte, go to 7(1) and 7(2) and then if you agree with that, then we'll go to (3).
Senator Massicotte: Okay.
The Chair: Okay?
Senator Massicotte: Although in (3), my amendment is the same as paragraph one. For the sake of debate, it's the same thing. I'm adding the same words.
Senator Day: Deal with it one at a time.
Senator Massicotte: Okay, deal with it one at a time.
The Chair: So it is agreed to adopt —
This is on Senator Massicotte's amendments, 7(1) and 7(2), right?
Senator Plett: There are two different amendments.
The Chair: They are two different amendments. It's the same clause so we can consider them at the same time. They were moved at the same time.
Senator Plett: Then I would like to speak to paragraph 2 as well.
The Chair: Go ahead, Senator Plett.
Senator Plett: We have, in the definitions, that the contractor means any person performing construction work under the construction contract with the government institution. Here we are changing it from contractor to general contractor. The word “contractor” is well accepted, and — no?
Mr. Bédard: When Senator Massicotte moved the amendment, Senator Massicotte did not say the word “general.”
Senator Massicotte: I'm dropping that. I did not read that in. I'm changing one word, the word “or” to “and” in sub paragraph 2.
Senator Plett: Okay. Well, I don't know that —
The Chair: What does that mean, Senator Massicotte? Why are you doing that?
Senator Massicotte: The current wording basically provides that when you send an invoice asking for payment, the contractor can send it to the architect and that's it, but the clock starts for payment. I think the person paying the bill should get a copy of the invoice. So I want the architect and the person paying the bill getting a copy of the invoice.
Senator Wallin: Hence the “and”.
The Chair: Senator Plett?
Senator Plett: The architect is clearly a representative of the government. If the architect gets the invoice, the government has gotten the invoice.
Senator Massicotte: I don't agree with that.
Senator Plett: This this would only muddy the waters. You know Senator Massicotte, I have been in the Senate for eight years. Before that I had been a contractor for 40 years. If an architect gets an invoice, that is sending the owner the invoice.
Senator Massicotte: Well, there is a national construction contract standard. It's a lot of fine print, but it makes it clear the architect is actually the arbiter. He is the one who determines whether construction has been done per plans and specifications. He is not the representative of the owner. What's the problem? If you send two copies of the invoice, what is the issue?
Senator Plett: You know, Senator Massicotte, if that's the only one we have to deal with, then we have to vote on this separately because I'm not going to put up a big fight over that word. I totally disagree with it, but you're right, maybe it isn't a big deal. It's a little more paperwork or another e-mail. Fine, but then we have to vote however on 7(1) and 7(2) separately.
Senator Massicotte: I agree.
Senator Wallin: For 7(1) and 7(2) we need to vote on them separately.
The Chair: We're going to do that. We're going to 7(1) first, which is Senator Massicotte's amendment.
Senator Wetston: Can I ask a question?
The Chair: Yes, please.
Senator Wetston: I'm trying to square the circle here as to trying to understand because as I think has been indicated, the Government of Ontario is definitely going to proceed with major amendments in the area of construction lien legislation as well as prompt payment. I think they are going to proceed in the very near future. It's unfortunate we don't have their bill now, but it will be in the near future.
The only reason I mention that is when I look at the construction pyramid here, I'm kind of losing track of which contracts we are talking about when we talk about the construction work. I see the definition, which makes some sense to me. I don't know where in the pyramid this exists any longer from the point of view of the amendment that is being suggested versus the one that we have here, or the provision. Let me indicate why.
I have no idea what terms we're talking about in the sense of if you say “unless otherwise specified” because this focus here is on prompt payment. It's not focused on other matters. There may be a lot of other matters in a contract that exist, but we're only talking about the prompt payment issue here. So other than the invoicing issue, can you clarify for me the basis of what you're getting at when you're thinking of your amendment? That would help me a great deal.
Senator Massicotte: I appreciate that. As proposed, what Senator Plett is recommending is that the payment will be whatever the contractor dictates but not any longer than 30 days. If you look at the wording he has, that's what he is proposing. I am saying I don't think we should be handcuffing the two parties to a contract. If they agree to 45 days or 30 days, that should be acceptable if they so agreed. If there is no such agreement, though, it automatically becomes 30 days. That's what I'm proposing.
Senator Wetston: Is that the contract between the contractor, subcontractor and other subcontractors? Which contractor are we talking about?
Senator Massicotte: The intent is that applies to everybody. You'll see later on that right now this exception deals with the government institution contractor, but to be consistent it has to go throughout.
Senator Wetston: Thank you.
Senator Tannas: You had me for a while at the idea that we didn't want to prevent the government and tie them to a P-3 contract where one of the big contractors does a design build and gets payment when the whole thing is finished years later, right? But what you have just said is that that's not really the intention because surely we don't want to force every subcontractor to have to follow along with whatever the general says, but that's the next amendment that you have got is that that would force everyone along the way into something.
Senator Massicotte: I don't agree. First of all, deal with the PPP or deal with the sale leaseback, which is what you see a lot of. I'm sure in that condition there is a contract that indicates the payment period. If it's a sale leaseback, it's over 30 years, so I'm sure that they will ensure it's very clear in the document. But sometimes they will deal with a lot of sub trades, and it may not be in a contract. I would be very surprised if it's not in the contract.
If the parties agreed to a date, we should respect that the parties agreed to the date. If by chance there is no such date, maybe because the contract is verbal or the maintenance guy went there and he didn't dictate the terms, then it's 30 days.
Senator Tannas: That's the whole testimony. This is the point. The whole testimony we had is that you have got a giant contractor and a bunch of small subcontractors and the balance of power says “would you like this contract where the contract says I'll pay you when I feel like it, and you have to accept it?”
Senator Massicotte: I think the practice is, and all the indication is such, that the contract — I highly suspect — says 30 days. The problem is the GC giving this power doesn't respect it. That's why this bill, as proposed, is going to say that if you don't pay, you get an adjudicator and then he can impose terms. It's not the contractor problem; it's his behaviour.
Senator Plett: The way this is worded, Senator Massicotte, the contractor can, as Senator Tannas just said, write a contract. Now, unfortunately, not all contractors are respectable people. We have people out there who want to try to take advantage and here is an absolute loophole that we are giving them to take advantage.
You and Senator Black have been talking about trying to stay with the Reynolds report. The Reynolds report doesn't agree with you.
The Chair: Those that are in favour of this amendment please raise your hands.
Senator Ringuette: Which one?
The Chair: I'm going to have the clerk read each one as we go. We will do the first one.
Ms. Gordon: It is moved by the honourable Senator Massicotte that Bill S-224 be amended on clause 7(1), page 4 at line 4, and it would read:
Unless otherwise specified in the construction contract, a government institution must make progress payments to a contractor for construction work on a monthly basis.
It would strike the balance of that paragraph there.
The Chair: Those in favour raise your hands?
Ms. Gordon: Okay, just a minute.
The Chair: Those opposed? Motion falls.
Next one?
Senator Massicotte: Sorry, it would read as follows:
Where no date for progress payments is provided for in the construction contract, the contractor must submit to the government institution and to the payment certifier, on the last day of the month, a monthly payment application that sets out a claim for the construction work performed as of that day.
Senator Plett: I know I'm repeating myself, so I will be brief. But again, I do not necessarily disagree that this is a huge, big deal. But we are voting on stuff here that no contractor's representative, no legal department, no law clerk, no contract lawyer has looked at, and we are opening up a can of worms by voting in favour of even this one word change. So I will be voting against it for that reason.
The Chair: No further discussion? All in favour of the amendment?
Senator Wallin: Adding in —
The Chair: I'm just going to count. Opposed?
The motion falls.
The Chair: We're on clause 7(3). Are there any other amendments?
Senator Massicotte: Yes, I'm proposing to paragraph 3 that it would read:
Unless otherwise specified in a construction contract, the government institution must pay the contractor on or before the 20th day following the approval or certification of contractor's payment application.
Senator Plett: It's the exact same thing we just voted on, this one, and this is a repeat of that wording, so again, I have the same reasons for not supporting it.
The Chair: No further discussion. All in favour of the amendment? All opposed? Motion falls.
Does clause 7, as amended, carry?
Hon. Senators: Carried.
The Chair: Carried.
Shall clause 8 carry?
Senator Plett: I move:
THAT Bill S-24 be amended in clause 8, on page 4, by replacing lines 18 to 21 with the following:
“8 (1) Where the construction contract provides a date for final payment, a government institution must make final payment in respect of construction work no later than the date provided in the construction contract or the 20th day after the approval or certification of the payment application, whichever is earlier.
The Chair: In favour? Agreed?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall clause 8 carry as amended?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall clause 9 carry?
Senator Plett: Honourable senators, I move:
THAT Bill S-224 be amended in clause 9, on page 5, by replacing lines 15 to 17 with the following:
“before the 23rd day following the approval or certification of the subcontractor's payment application.”.
The Chair: All those in favour? Against?
So shall clause 9 carry as amended?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall clause 10 carry?
Senator Plett: I move:
THAT Bill S-224 be amended in clause 10, on page 5, by replacing lines 18 to 21 with the following:
“10 (1) Where the construction contract provides for a date for final payment, a contractor or subcontractor must make final payment in respect of construction work no later than the date provided in the construction contract or the 30th day after the approval or certification of the payment application, whichever is earlier.”.
The Chair: Agreed?
Senator Massicotte: I don't agree.
The Chair: On division?
Senator Massicotte: On division.
Senator Day: Changes to 10(2)? No changes? I just wanted to —
Senator Plett: Clause 10, I have one.
The Chair: Clause 10?
Senator Day: We have agreed. We've done 10, and it was clause 10(1). My question was whether there was anything with respect to (2).
The Chair: I haven't heard anything yet. Is clause 10 then carried as amended?
Senator Campbell: Yes.
The Chair: Good; carried.
Shall clause 11 carry?
Senator Plett: I move:
THAT Bill S-224 be amended in clause 11, on page 6, by replacing line 6 with the following:
“payments in respect of the improvement and, in respect of milestones related time intervals, milestone payments are provided at intervals no less frequent than the intervals provided in the contract between the government institution and the contractor.”.
The Chair: Agreed? Agreed, with the amendment.
Are there any further amendments? If there are no further amendments, shall clause 11 carry as amended?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall clause 12 carry?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall clause 13 carry?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall clause 14 carry?
Senator Massicotte: Chair, I have an amendment to propose.
The Chair: On clause 14?
Senator Massicotte: 15.
The Chair: Shall clause 14 carry?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall clause 15 carry?
Senator Massicotte: I have an amendment to clause 15(b). As it currently reads, we talk about where a construction contract does not provide for progress payments, the value of the construction work performed, et cetera.
Here is what it says:
(b) where a construction contract does not provide for progress payments, the value of the construction work performed and of the related goods or services supplied on the date of payment for the payment period, relative to the value of the entire construction contract, including the value of all changes.
It's a little big complicated, but let's go through it again. It basically says that the progress payment will be equal to this amount. It basically says, in other words, the value of the construction work done to date is what is going to be paid. First of all, “value” is a difficult term. A bottle of water costs a buck; in a desert it may be worth 2,000 bucks. I think it should be the cost and not the value of the construction work, but also it should be, you did this much construction work, you got paid this much, so it should be the difference of both.
In other words, if you're in the third phase of the construction of an office building and they spend $4 million on it, then you go to another phase and they spend 4.5, you don't pay 4.5; it's 4.5 less the billing already incurred.
This does not deal with that. It basically says it's the value of all the work done and that's the value of the invoice. He's going to see duplication of payment constantly. Mechanically it doesn't work. It should be the amount of work done in that interval for what you're billing, not for the total value of the work done so far.
Do you understand? Is that clear? In other words, the way it's worded, it's the cumulative work that's done as opposed to cumulative work done, less payment made or invoice already invoiced.
The Chair: I have a question from Senator Ringuette.
Senator Ringuette: Senator, if you were a contractor and you did some work and you paid your guys and you paid for your material, would you invoice for only your cost?
Senator Massicotte: “Cost” is a better word than “value,” but cost doesn't mean it doesn't include profit. In other words, a subtrade has the right to include his profit.
Senator Ringuette: But that's not cost.
Senator Massicotte: Cost to me, if I buy something, is maybe different from the manufacturer. “Cost” is a generic word; it includes normal profit. But more importantly, the billing should be equal to what they call progress payments. It's work done so far minus amount billed and you bill the difference.
Senator Campbell: I don't understand this. So you spend $4 million on your first phase and I've paid you that. And then we start on the second phase; it's another half a million dollars. I don't bill you $4.5 million. I've already got paid for the $4 million. The next bill would be for half a million.
Senator Massicotte: I agree 100 per cent, but look at the wording that's currently in place: Where the construction contract does not provide for progress payments, the value of the construction work performed and of the related goods and services supplied on the date of payment for the payment period relative to the value of — is what you're going to bill, including the value changes. It's semantic. I'm not negotiating. I'm basically saying you should bill for the work contracted in that period, given you already billed for the other phases. That's all it is.
Senator Ringuette: No, but it's in the case that the contract does not provide for progress payment.
Senator Massicotte: I agree, but you shouldn't get paid — let's say you've had 10 billings and you've billed 5 million bucks. Now you're going to do 11 billings. You don't bill $5.2 million; you bill $5.2 million, minus the billing of today's $5 million, and you bill $200,000.
Senator Plett: I don't know whether Senator Massicotte has ever been in construction, but I find this mind-boggling. When I tender a job, nine out of ten times contractors don't make the amount of money that they want and maybe five out of ten times they even lose money. Nevertheless, when we bid a job, we actually have the crazy notion that we're going to put profit into our tender and hopefully we can get some profit. That is not cost. That's value. That is not cost.
For us to start talking about cost, who determines that? The value will be determined by the architect; the value will be determined by the certifier; the value will be determined by the adjudicator if there is a question later on. They will determine the value. They won't determine the cost because you're entitled to the value of what you've done. This makes no sense.
Senator Wetston: I don't have a solution to this except a question for clarification. I don't know, frankly, what the word “value” means. It's not defined, but I'm sure that Senator Plett knows what it means, and I suspect that Senator Massicotte might have a good idea of what it means. I'm asking the following question, if I may, chair.
The Chair: You may.
Senator Wetston: Is value what I might describe a term of art in the construction business? Is it something that any architect, any contractor or any subcontractor would know immediately? If I said, for example to Senator Massicotte, what's the value of this work in a construction perspective, he would know exactly what I would mean, or you would? That's my first question.
The second question, based on the draft here — because I certainly understand what you're getting at, whether or not it requires an amendment. I want to ask one other question.
Is there anything in the language here that describes services supplied on the date of payment for the payment period? Does that in any way modify the amount of money that may be owed in the circumstances that Senator Massicotte is getting at and that Senator Campbell has just described? I ask you that based upon your experience in the drafting of this bill.
Senator Plett: Senator Wetston, cost basically — I'm a subtrade, and when we do costs here, I will give you a certain amount of money and I will put my markups on it and so forth. That will become a cost to the general. It's my markup, but it's his cost. He will then mark it up, whatever is allowed for by the contract, and the contract actually allows how much a contractor can mark up the price. That becomes the value.
So the wording here has to be “value.” Colleagues, if we want to change this, we've got to have lawyers; we've got to have a contract lawyer; we've got to have the trades weighing in on this. We cannot change something from “value” to “cost” without having them clearly defined.
Senator Massicotte: The question is irrelevant, because when they do their billing, what the architect will certify is when you're finished 42 per cent of the job. In the previous billing you billed 37 per cent of the job, so you now bill 5 per cent of the fixed-price contract that the subtrade gave it. The cost, or even value, never enters into the discussion. It's a mathematical calculation based upon what was previously billed and what percentage you complete. The GC does not know what profit element he has in there, and it's not his business.
This paragraph has two problems. First, they use the word “value,” which is difficult; and second, it doesn't allow billing for the work done in a specified period for which it relates to.
Senator Wetston: So the date of payment for the payment period doesn't help you with that?
Senator Massicotte: No. It really should say “for the period in question, including the cost of all changes.”
Senator Black: Thank you very much. I would simply point out that the concept of value is not contained in the Reynolds and Vogel recommendation. They don't even talk about value.
Senator Plett: The fact of the matter is, Senator Massicotte used the term “42 per cent of the contract,” so you pay for 42 per cent. That in fact is the value. That's not the cost. That's the value to the owner to pay 42 per cent, not the cost of the contractor. Value is the standard used in the industry. It is a well-known term in the industry, and for us to change it — this is a contract document. This is prompt payment for trades. They understand the word “value.”
The Chair: I'm going to ask Senator Massicotte, just so we have it the same on record, if you could just repeat the amendment and then we'll vote.
Senator Massicotte: I'll repeat the paragraph. It's actually 15(b). The wording should say “where a construction contract does not provide for progress payments, the cost of the construction work performed and of the related goods and services supplied as of the payment period for the period in question, including the cost of all changes.”
The Chair: Okay. Those in favour? Four. Those opposed? It falls. Shall clause 15 carry, as amended?
Hon. Senators: Agreed.
The Chair: Agreed. We defeated the amendment. Shall clause 15 carry?
Hon. Senators: Agreed.
The Chair: Clause 16, Senator Plett.
Senator Plett: I move:
THAT Bill S-224 be amended in clause 16, on page 7, by replacing line 11 with the following:
“after its receipt when it is submitted by a contractor, or the 20th day after its receipt when it is submitted by a subcontractor, unless, before that time, the payer or the”.
So we would have to look at the bill if you want to know exactly what it does.
The Chair: All in favour? Agreed?
Senator Massicotte: Relative to paragraph 1 only or the whole clause?
The Chair: No, the amendment.
Agreed?
Hon. Senators: Agreed.
The Chair: Any other amendments to 16?
Senator Massicotte: Yes, I do have an amendment. Paragraph 3(b). Again, I take out the word “value” and add the word “cost.” I think I know your opinion but it's important to be on the record how to make it right.
Senator Ringuette: You want to be consistent.
The Chair: I want to make sure we're good here.
Senator Plett: At the very end of it — first line.
Senator Massicotte: “Value” changed to “cost.”
The Chair: Those in favour? Those opposed? Amendment fails.
Shall clause 16 carry as amended?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall clause 17 carry?
Senator Plett: There's a little more on this one, colleagues. I move:
THAT Bill S-224 be amended in clause 17, on page 8,
(a) by replacing lines 7 to 10 with the following:
“dance with this Act, the payee may suspend performance of the construction work
(a) if the payee is a contractor, by immediately providing a written notice of default to the government institution, and sending a copy of the notice to all”;
(b) by replacing lines 15 to 17 with the following:
“(b) if the payee is a subcontractor, by immediately providing a written notice of default to the payer, and sending a copy of the notice to the government in-”; and
(c) by replacing lines 23 to 26 with the following:
“work if the payer fails to make payment in accordance with a decision of an adjudicator rendered pursuant to section 20 within seven days after the decision is rendered or within such other time period as the adjudicator may order.
(3) Where a payee commences and diligently continues adjudication, the payee may, by written notice to those persons”.
Senator Campbell: I'm confused here, because I have “dance with this act.”
Senator Plett: I'm trying to look that up, Senator Campbell, because I do as well. I said right away it sounds strange. “In accordance with”?
Senator Campbell: “In accordance with.”
Senator Plett: I noticed it when I said that. When I said “dance,” I said it sounds strange, but I have too many papers in front of me. “In accordance with.” It's the second line.
Senator Wallin: It's a hyphenated word.
Mr. Bédard: The way the amendment is drafted, we're replacing lines, and the line begins by “dance.” That's why you have “dance with the act.”
The Chair: All those in favour?
Senator Massicotte: I have an amendment.
The Chair: You have a subamendment to the amendment?
Senator Massicotte: Yes.
The Chair: We've all got the amendment in front of us. What would you like to do with that?
Senator Massicotte: Here's how it reads. Maybe you want to confirm this, senator. It's where “the payer fails to make payment in accordance with this act, the payer may suspend performance of the construction work.” That's what it's been amended to, right? I presume that's the case. I think that's where you're at.
The problem I have with that — and I think I know where the problem lies — but this gives the impression to anybody reading it that if one does not make payment as so proposed with the 14-day notice, the contract can be suspended. That's not the intent. You'll see later on, basically, no, no, no. If you have a dispute repayment, it goes to an adjudicator who decides. Only if you don't perform based on the adjudicator can you suspend or end your contract.
The argument could be made the word “act” does not mean what I just said. In other words, one could say — it does give the impression clearly that you're going to suspend the work, irrespective of the adjudicator intention, which is not the intent of the amendment. I think you have to make it a bit more clear there.
Senator Wallin: To what does it apply? How far down?
Senator Massicotte: I would change the word to read as follows. I would basically say what I just said. I think the intent is “where the payer fails to make payment or the payee fails to satisfy its obligations, subsequent to and in accordance with an adjudication order that appealed to a higher court, the payee may, after 14 days written notice to the government institution and all affected contractors and subcontractors, suspend performance of the construction work and/or terminate the construction contract with the payer.”
I think that's where you want to go. I think it's cleaner. In other words, you can't just suspend without the adjudicator, and you can only do so if you fail to perform based upon the adjudicator's decisions. “Where the payer fails to make payment or the payee fails to satisfy his obligations, subsequent to and in accordance with an adjudication order that is not being appealed to a higher court, the payee may, after a 14-day written notice to the government institution and all affected contractors and subcontractors, suspend performance of construction work — or terminate the construction contract with the payer.”
Frankly, I think it's the intent of Senator Plett. I'm just making it clearer.
Senator Ringuette: — higher court?
Senator Massicotte: Use a different word if you want. I think most Canadians would understand what I mean.
The Chair: This is very confusing.
Senator Plett: Contractors have commented on this section — that it may be interpreted so as to allow suspension in either of two instances: upon the mere delivery of a notice of default, 17(1), or upon failure to abide and an adjudication order, 17(2).
This is not the intent. As recommended in the Reynolds report and accepted by general contractors and trade contractors, a right to suspend should only arise following an adjudication and failure to abide by the adjudicator's ruling.
The language of 17(1) simply stipulates that notice must be given before a suspension right arises.
It's very simple, and clearly this was thought through by the contractors. This is the proper wording for it.
Senator Tannas: I have a question. I think we've made it clear that your concern is dealt with. When they go to draft the regulations, presumably this discussion and others would be taken into account, right? If they have any question around intentions, as our friend Senator Baker always says, somebody comes and looks to see what we intended. But clearly the intention is there.
Senator Massicotte: My point is that when you draft legislation, it has to be consistent with the intent of the legislation. I'm not sure the wording as-is is consistent with the intention.
The Chair: Are you okay, senator? Do you want your amendment to go forward?
Senator Massicotte: Yes, of course.
The Chair: All those in favour?
Senator Massicotte: Hold on. Subclause 17(1). I'm adding another paragraph. If you want to deal with that paragraph, but I'm adding a second paragraph, 17(1).
Senator Wallin: They must go to arbitration.
Senator Massicotte: In other words, you can't suspend or terminate the contract. You have to go to adjudication only if the other party doesn't satisfy it.
But the legislation proposed by Senator Plett deals with always — in other words, the payee didn't get paid. But the proposed legislation deals with any dispute between the parties, not only payment. In fact, 80 per cent of all disputes relate to the fact that the owner or the contractor says “you didn't do it to spec; it's not consistent with the contract.” The proposed act allows that.
I'm saying deal with that. In other words, we always presume it's the payee getting shafted by the payer. I don't know — it could be the sub-trade of another trade. You must allow the alternative; in other words, where the payee fails to satisfy its obligation. Not only the payer. It should be the same thing.
Subsequent to, in accordance with an adjudication order that is not being appealed with a higher court, the payer may after a 14-day written notice to the government institution and all affected subcontractors, suspend performance of the construction work and/or terminate the construction contract with the payee. You can't have it both ways. You can't say, “You didn't pay me. You have a right to suspend.” It could be the reverse. The adjudication order maybe says, “Mr. Subtrade, you didn't do the work accordingly.” You get on to do it and you have two months or three weeks, but if he doesn't perform the other party should have the right to terminate the contract. All parties have the right to the same recourse if the person doesn't act in accordance with the adjudication order.
Senator Plett: I think in large part this might be a drafting issue. We want suspension only if failure to comply with an adjudicator’s decision, not a mere giving of notice. Okay?
The problem with Senator Massicotte's amendment is that it does not deal with this problem. My suggestion is that we vote this amendment down, we stay consistent with what we have, that this may be a drafting issue and that I am willing to look at this drafting issue for third reading with Senator Massicotte to make that change at third reading.
Senator Massicotte: The only thing is, Senator Plett, your motion only deals with the payee being at fault of the payor and it should allow for both. It may be a subtrade who doesn't perform their contractual obligations, but all parties should have a right to the same recourse if they don't follow the adjudication order.
Senator Wallin: Fix it in drafting if need be.
Senator Plett: I'm saying to you Senator Massicotte that I am willing to work with you on this, but again we need to have our legal counsel, the trades and the law clerk involved. .
Senator Massicotte: I have no difficulty with that type of resolution.
Senator Plett: I am saying, here for the record, on that particular issue I am committing now to work with you, Senator Massicotte, on trying to find an amendment that is amenable at third reading.
The Chair: Are you good with that, Senator Massicotte?
Senator Massicotte: I'm not sure. In other words, it should not be for me or Senator Plett to agree or disagree. It should be the committee. He should not have a veto right, and I should not have a veto right.
The Chair: Well, I'm asking. I'm saying you made the motion. We can carry on with the motion and ask what the committee feels or you can withdraw the motion and deal with Senator Plett. Those are the two options. I'm leaving it in your hands.
Senator Wallin: For clarification, I don't think it's because they don't trust each other. I think if you're looking for intent, then the word should be there and then you can fix it in drafting, to go about it the other way so that it is clear that adjudication is there and that both sides have access to it. Then you can go and fix it in post, as we used to say in TV land.
Senator Plett: The intention is clearly there. Colleagues, whether Senator Massicotte withdraws it and we have a gentleman's agreement, I commit to this committee that, regardless of Senator Massicotte's agreement, if we vote this down here, I will deal with the trade contractors' lawyer in getting proper drafting and I will make sure Senator Tannas brings an amendment forward at third reading if I need to.
Senator Tannas: I have one question also in regard to Senator Massicotte's amendment. I think we were introducing the higher court. Is that part of the bill up until now?
Senator Massicotte: Now, in my amendment, yes.
Senator Tannas: That's a whopper. Anybody can say, “I'm appealing that. Now I don't have to pay.”
Senator Massicotte: That right of appeal exists in Senator Plett's bill, also.
Senator Tannas: Okay.
Senator Massicotte: The law is the law. It's already there. He has the right to appeal.
Senator Plett: Not the adjudicator's decision.
Senator Massicotte: But I thought it was very clear in your draft that anybody can appeal an adjudicator's decision to an upper court. I don't think you can stop it.
The Chair: Are we ready to vote?
Senator Massicotte: I still maintain my amendment is the bottom line.
The Chair: All in favour of the subamendment to the amendment? Four. All opposed? Abstentions? The subamendment falls. We have an amendment.
Any further amendments to 17? All in favour of the amendment of Senator Plett? Agreed?
We did not vote on that. We went to the subamendment. Now we're dealing simply with Senator Plett's amendment. Are we agreed?
Hon. Senators: Agreed.
The Chair: Agreed.
We'll go to clause 17, as amended.
Senator Massicotte: I have something for 17(3).
The Chair: You have another amendment on 17? Is there a 17(3)? We don't have a 17(3). We've already dealt with 17, have we not? I thought we did.
I did ask if 17 shall carry and it was agreed.
Shall clause 18 carry?
Senator Plett: Chair, I move:
THAT Bill S-224 be amended in clause 18, on page 9, by replacing lines 16 and 17 with the following:
“rate prescribed by regulation, whichever is greater.”.
The Chair: All in favour?
Hon. Senators: Agreed.
The Chair: Agreed. Shall clause 18 carry as amended?
Hon. Senators: Agreed.
The Chair: Shall clause 19 carry? Senator Plett.
Senator Plett: I move:
THAT Bill S-224 be amended in clause 19,
(a) on page 9,
(i) by replacing line 21 with the following:
“payee in accordance with a decision of an adjudicator rendered pursuant to section 20.”, and
(ii) by replacing line 25 with the following:
“payment within 14 days after receipt of the notice, the”; and
(b) on page 10, by replacing line 4 with the following:
“make payment within 14 days after receipt of the”.
The Chair: All in favour?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall the amendment carry?
Hon. Senators: Agreed.
The Chair: Shall clause 19 carry as amended?
Hon. Senators: Agreed.
The Chair: Let's go to clause 20. Shall clause 20 carry?
Senator Plett: I move:
THAT Bill S-224 be amended in clause 20, on page 10,
(a) by replacing lines 17 to 19 with the following:
“identify the matter in dispute and the relief sought.”;
(b) by adding after line 24 the following:
“(4.1) Each party may provide a written submission to the adjudicator respecting the matter under dispute within 10 days of the later of the appointment of the adjudicator or the receipt of the notice by the other party.
(4.2) The adjudicator must render a decision within 28 days, or any greater period agreed to by the parties, of the expiry of the period referred to in subsection (4.1).
(4.3) Where the adjudicator does not render a decision within the period referred to in subsection (4.2), a party may refer the matter to another adjudicator by providing the other party with a notice under subsection (2).”.
(c) by replacing lines 28 and 29 with the following:
“and they must comply with it until such time as the dispute is finally determined by legal proceedings, arbitration or agreement of the parties.
(6.1) A decision of the adjudicator is enforceable as a judgment of a court of competent jurisdiction.”.
The Chair: That's a mouthful. All agreed to the amendment?
Hon. Senators: Agreed.
The Chair: Agreed.
If there are no further amendments to clause 20, shall clause 20 carry, as amended? Agreed.
The Chair: Shall clause 21 carry?
Hon. Senators: Agreed.
The Chair: Agreed.
Shall clause 22 carry?
Senator Plett.
Senator Plett: I move:
THAT Bill S-224 be amended, on page 12, by adding the following after line 2:
“Holdbacks
22.1 Despite any other provision of this Act, a construction contract may provide a payer with the right to retain holdbacks provided that the holdbacks in a construction contract between a contractor and a subcontractor or between a subcontractor and another subcontractor do not exceed the holdbacks provided in the construction contract between the government institution and the contractor for the same improvement.”.
The Chair: All agreed?
Hon. Senators: Agreed.
The Chair: Carried.
Shall clause 22 carry? Sorry?
Senator Day: I just wonder about when this is being re-drafted with all of these amendments. I'm speaking to legal counsel here. You have got regulations —
The Chair: It has just come to you now, Senator Day? Sorry, Senator Day.
Senator Day: Your clause 22. This is 22.1, being added after the clause about regulations, which would typically be at the end. Can you put this in as 21?
Mr. Bédard: It is not subsection 22.1. It is a new section 22.1.
Senator Day: But you're adding it after the right to regulations, whereas this is a substantive matter. It should be in the body of the bill.
Mr. Bédard: It's separate, and it has its own title.
Senator Day: Yes.
Mr. Bédard: “Holdbacks.” When the bill will be reprinted, it will no longer be 22.1. It could be renumbered 23.
Senator Day: Could you put it before the regulations? That's the point I'm trying to make.
Mr. Bédard: If it is the will of the committee, it could be —
Senator Day: This is pretty substantive stuff, but you have it in here after regulations, which is typically the end of the bill.
The Chair: Does it really matter?
Senator Plett: Listen, senator I have no issue with placing it there. I guess my idea is that holdback is the last thing on the job, so maybe it should be the last thing in the bill. But I'm okay with whatever suggestion —
The Chair: It doesn't really matter one way or the other.
Senator Plett: No, I'm fine with it.
The Chair: Let the law clerk deal with this.
Senator Plett: Yes, absolutely.
Senator Day: If I hadn't made the point, the law clerk wouldn't have known that I made the point.
Senator Plett: Thank you for making the point.
The Chair: But, Senator Day, it wouldn't have made any difference.
Senator Day: There will be no holdbacks now until the regulations are done.
The Chair: Shall clause 22 carry as amended?
Hon. Senators: Agreed.
The Chair: Agreed.
We have a new clause here. Are there any further amendments?
Mr. Bédard: We cannot just move clauses around. It must be clear where he wants holdbacks. It can be before or after regulations.
The Chair: Okay. Sorry. Now the law clerk says that it doesn't matter, but it has to be clear where you want it. So do you want it —
Senator Campbell: Before, before the regulations.
Senator Wallin: Yes, before.
The Chair: Okay. Is that good?
Senator Campbell: That's good.
Mr. Bédard: It's clear enough.
The Chair: Everybody agreed?
Hon. Senators: Agreed.
The Chair: Okay. So are we done 22? Yes, 22 has been carried as amended.
Shall clause 23 carry?
Hon. Senators: Agreed.
The Chair: Shall clause 1, which contains the short title, carry? You have no idea how happy it makes me to say that.
Hon. Senators: Agreed.
The Chair: Shall the title carry?
Hon. Senators: Agreed.
The Chair: Shall the bill, as amended, carry?
Senator Massicotte: No.
Some Hon. Senators: Agreed.
The Chair: On division.
Ms. Gordon: I have a couple of motions. I want you to propose this motion.
The Chair: What does this mean?
Ms. Gordon: It's just to allow —
The Chair: Hold on one second here; I'm just conferring.
Ms. Gordon: It's not a bad idea to pass this motion to allow the Law Clerk's Office to make any changes to the numbering or cross references.
The Chair: Okay. So what we have here is a whole bunch of amendments, and we have a bill. So this is a maintenance motion to allow the law clerk to make changes as he puts this bill together. So it would read that any necessary consequential changes be made to the numbering of provisions and cross references as a result of the amendments to this bill.
Hon. Senators: Agreed.
The Chair: Is there anything else I have to do here? It is agreed that I report this bill, as amended, to the Senate?
Hon. Senators: Agreed.
The Chair: Any additional motions? Please say no. If that's the will, thank you so much for all the hard work. We got this done in pretty good time. It's only five minutes after six. I want to thank all members for the contributions to this bill and also Senator Plett for taking the time to take into consideration what we have been trying to say in committee and make all the amendments necessary to satisfy our particular concerns.
So, with that, despite a few hiccups here and there, I'm going to call this meeting adjourned.
(The committee adjourned.)