Gaming the Prompt Payment Construction Lien Act (PPCLA)-Method of Trying to Avoid the PPCLA

The following appears to be a dodge that some general contractors are reportedly using to avoid paying subcontractors, per the terms of the Prompt Payment Construction Lien Act (PPCLA).

Apparently, some unnamed general contractors are using the PPCLA Form 2 (see https://pgaa.ca/wp-content/uploads/2024/04/Method-of-trying-to-Avoid-PPCLA-20240328.pdf) to add time to paying bills that are legitimately due. Form 1, is the notice of dispute that an Owner is to give a Contractor notice that the Owner will not be paying some or all of a disputed invoice. Form 2 is the Contractor’s Notice of Non-payment, to communicate downstream to subcontractors, issues of non-payment, resultant of their receipt of a Form 1 from the owner. This form is issued by a Contractor to give notice to a Subcontractor that the Contractor has not received payment from the Owner and will therefore not be paying some or all of the Subcontractor’s invoice. By signing and sending this form, the Contractor (GC) agrees to refer the matter to adjudication within the allotted 21-day period set out in Part 5 pf the PPCLA. Logically, it would be assumed that the subcontractor(s) receiving this form would also enter into adjudication to resolve their non-payment as well.

Therefore, should you recieve a Form 2 from a general, the subcontractor should ask if they can join in the GCs adjudication with the owner, or if you should launch their own. If the GC is indeed gaming the system, there will be no adjudication and they will not want the subcontractor to adjudicate with them or the owner, as this would expose their game.

It is reported that some generals are using Form 2, having not received a Form 1 from the owner, to extend their payment time frame, regardless of their obligations under the PPCLA. If this is because the owner has not paid, and neglected to issue a Form 1, disputing some or all of the payment, they will certainly lose in adjudication. If the contractor has legitimately not been paid, but has not referred the matter to adjudication, the subcontractor can start an adjudication against the general for monies owed, and argue that the contractor has breached the act by not adjudicating with the owner. Again the subcontractor would win here. Further, as it is being reported, if the general is submitting a Form 2, when they have not received a Form 1 and in fact have been paid, they are in contravention of the act and will lose in an adjudication, and may face additional penalties for their actions.

This is the kind of activity that the Alberta Trade Contractors Association is looking to catch, to keep the Government of Alberta aware of, and to ensure that attempts to game the legislation are nipped in the bud.