The regulations applicable to the Construction Act of Ontario have also been approved by cabinet and posted to www.ontario.ca. For purposes of this discussion, we will be focusing only on those regulations that pertain to surety bonds.
The regulations are grouped into four broad subject areas: General, Forms, Adjudication and Procedures for Actions. That last category sets out the protocol and procedures for initiating and pursuing legal action under the Act and contains nothing specific to bonds. The bond forms are included as part of the “Forms” regulations and a more detailed discussion can be found by CLICKING HERE.
Both the General and Adjudication regulations include references to surety bonds.
The General Regulations can be accessed by clicking CLICKING HERE. Note that there are two regulations that pertain directly to bonds:
- General Regulation #3 sets out the minimum bond amounts for performance and payment bonds on AFP/P3 projects. This regulation now reads:
3. For the purposes of paragraph 2 of subsection 1.1 (4) of the Act, the minimum coverage limit is,
(a) 50 per cent of the contract price, if the contract price is $100,000,000 or less; or
(b) $50,000,000, if the contract price is more than $100,000,000.
The paragraph in the Act that is referenced here reads:
2. The Crown, municipality or broader public sector organization, as the case may be, may require a coverage limit other than one specified in clause 85.1 (4) (b) or (5) (b), provided that it meets or exceeds any coverage limit that may be prescribed for the purposes of this paragraph.
- General Regulation #12 sets the threshold for mandatory bonds at $500,000.
As far as surety bonds are concerned, the final regulations approved by cabinet specify that the right to adjudication under the Act will apply only to disputes under the labour and material payment bonds. We have been told by the ministry that adjudication of performance bond disputes may be considered once the current regime is established and functioning well.
Payment bond disputes are dealt with under Regulation #25 which can be accessed by CLICKING HERE. For the most part, these regulations provide clarification of terms and specific processes as they apply to the unique nature of payment bond disputes. However, Regulation 25 (6) identifies several areas of the Adjudication regime (Section 13 of the Act) which will not apply to Payment Bond disputes.
This information is provided for information purposes only and is not intended to be exhaustive or authoritative. Nothing here should be construed as legal advice and readers are urged to read the Construction Act of Ontario and supporting documentation thoroughly and consult with counsel for advice as to specific issues.