2022 NBCA 39, 2022 NBCA 39

COURT OF APPEAL OF COUR D’APPEL DU NEW BRUNSWICK NOUVEAU-BRUNSWICK B E T W E E N: POTASH CORPORATION OF SASKATCHEWAN INC. APPELLANT - and - HB CONSTRUCTION COMPANY LTD. RESPONDENT 82-20-CA E N T R E : POTASH CORPORATION OF SASKATCHEWAN INC. APPELANTE - et - HB CONSTRUCTION COMPANY LTD.

INTIMÉE - and - B E T W E E N: HB CONSTRUCTION COMPANY LTD. (formerly COMSTOCK CANADA LTD.) APPELLANT - and - POTASH CORPORATION OF SASKATCHEWAN INC. and WOOD CANADA LIMITED (formerly AMEC AMERICAS LIMITED) RESPONDENTS - et - 83-20-CA E N T R E : HB CONSTRUCTION COMPANY LTD. (auparavant COMSTOCK CANADA LTD.) APPELANTE - et - POTASH CORPORATION OF SASKATCHEWAN INC. et WOOD CANADA LIMITED (auparavant AMEC AMÉRIQUES LIMITÉ

E) INTIMÉES

Potash Corporation of Saskatchewan Inc. v. HBConstruction Company Ltd., 2022 NBCA 39 CORAM: The Honourable Justice Quigg The Honourable Justice LaVigne The Honourable Justice LeBlond Potash Corporation of Saskatchewan Inc. c.

HBConstruction Company Ltd., 2022 NBCA 39 CORAM : l’honorable juge Quigg l’honorable juge LaVigne l’honorable juge LeBlond Appeal from a decision of the Court of Queen’sBench: October 2, 2020 Appel d’une décision de la Cour du Banc de laReine : le 2 octobre 2020 History of Case: Historique de la cause :Decision under appeal: 2020 NBQB 180 Décision frappée d’appel : 2020 NBQB 180 , 2020 NBBR 180 Preliminary or incidental proceedings: [2020] N.B.J. No. 319 [2020] N.B.J. No. 332 [2021] N.B.J. No. 67 [2021] N.B.J. No. 92 [2021] N.B.J. No. 217 [2021] N.B.J. No. 238 [2021] N.B.J. No. 356 [2021] N.B.J.

No. 358 Unreported decision filed September 30, 2021 2022 NBQB 59 Procédures préliminaires ou accessoires : [2020] A.N.-B. no 319 [2020] A.N.-B. no 332 [2021] A.N.-B. no 67 [2021] A.N.-B. no 92 [2021] A.N.-B. no 217 [2021] A.N.-B. no 238 [2021] A.N.-B. no 356 [2021] A.N.-B. no 358 Décision inédite déposée le 30 septembre 2021 2022 NBBR 59Appeal heard: October 26, 27 and 28, 2021 Appel entendu : les 26, 27 et 28 octobre 2021 Judgment rendered: August 11, 2022 Jugement rendu : le 11 août 2022

Reasons for judgment by: The Honourable Justice LeBlond Concurred in by: The Honourable Justice Quigg The Honourable Justice LaVigne Counsel at hearing: For Potash Corporation: Peter T. Zed, Q.C., Laura Boyd and John P. F. Morrissy For HB Construction Company Ltd.: Robert M. Creamer, Q.C., Matthew Robert Letson, Howard M. Wise and Mark S. Dunn For Wood Canada Limited: Frederick C. McElman, C.M., Q.C., Clarence Lee Bennett, Conor O’Neil and Lara J.

Greenough Motifs de jugement : l’honorable juge LeBlond Souscrivent aux motifs : l’honorable juge Quigg l’honorable juge LaVigne Avocats à l’audience : Pour Potash Corporation : Peter T. Zed, c.r., Laura Boyd et John P. F. Morrissy Pour HB Construction Company Ltd. : Robert M. Creamer, c.r., Matthew Robert Letson, Howard M. Wise et Mark S. Dunn Pour Wood Canada Limited : Frederick C. McElman, C.M., c.r., Clarence Lee Bennett, Conor O’Neil et Lara J. Greenough THE COURT The appeals are dismissed. A further hearing will be scheduled with respect to the issue of costs. LA COUR Les appels sont rejetés.

Une audience complémentaire aura lieu pour traiter de la question des dépens. TABLE OF CONTENTS Paragraph I. Introductio n A. The actions below

(1) The first action

(2) The second action B. The decision 1 1 3 9 10

II. Factual Context A. The Comstock Contract B. The change order process and scheduling C. The weekly coordination meetings III. The Appeals IV. Standards of Review V. Analysis Comstock’s Appeal A. Should AMEC have been found liable in damages to Comstock? B. Is AMEC liable for collusion or bad faith conduct relating to its claim of common interest privilege with PCS?

A common interest privilege claim does not support liability for collusion No basis for the proposition that a claim of common interest privilege must create an adverse inference of collusion or conduct that would breach the contractual duty of good faith No evidence of collusion or bad faith conduct C. Did AMEC commit the tort of inducing breach of contract? D. Are there grounds for an award of punitive damages against AMEC or PCS? E. Comstock’s delay-related claims

(1) Accepted methodology for assessing site duration costs

(2) Correct application of methodology 14 28 34 44 141 144 148 148 182 182 183 188 190 208

(3) Other delay-related costs

(4) Changes to the work

(5) Impact of cold weather

(6) Area availability PCS’s Appeal F. Should the trial judge have drawn an adverse inference against Comstock for its failure to call Geoffrey Birkbeck to testify?

(1) Criteria for drawing adverse inference

(2) The test for granting an adverse inference

(3) No material evidence G. Did the trial judge err by conflating the issue of Comstock’s failure to diligently conduct changes to the work with whether that failure amounted to a refusal to perform the work in assessing PCS’ grounds to terminate the Comstock Contract? H. Did the trial judge err in her assessment of Comstock’s knowledge of the particulars to support PCS’ termination of the Comstock Contract? Mr. McLellan testified Comstock did not know what the Notice of Default referred to and that evidence was not challenged I.

Could PCS terminate the Comstock Contract based on the doctrine of fundamental breach? The test for fundamental breach J. Did the trial judge err in law in not allowing a set-off against Comstock’s claim for the deficiencies claimed by PCS following contract termination? 229 231 240 262 279 286 294 298 298 299 300 302 310 323

PCS failed to prove its rework claim VI. Disposition Appendix “A”: General Conditions 336 343 346 360 366 376 Page 124 The judgment of the Court was delivered by LEBLOND, J.A. I. Introduction A. The actions below [ 1 ] The underlying actions to the two appeals filed in these matters relate to the construction of a compaction plant at the potash mine of Potash Corporation of Saskatchewan Inc. (PCS) located in Penobsquis/Picadilly, New Brunswick.

The project is sometimes referred to, both in the decision below and in these reasons, as “CP-15.” The construction contract was awarded to Comstock Canada Ltd. (the “Comstock Contract”).

Following PCS’ termination of the Comstock Contract, and prior to the underlying trial, pursuant to an Approval and Vesting Order of the Ontario Superior Court of Justice dated December 13, 2013, HB Construction Company Ltd. acquired certain assets of Comstock, including the rights to the action it commenced below, in accordance with a plan of compromise or arrangement of Comstock under the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36 , as amended.

Throughout the reasons in the decision of the judge below, the contractor is referred to as Comstock, and the same designation will be used in these reasons in the interest of continuity. [ 2 ] PCS had a separate contract with AMEC Americas Limited to receive the engineering, procurement, design and construction management for the project. Of particular interest for these appeals, AMEC was responsible for assessing Comstock’s claims for additional compensation by way of the contractual change order process. It was also responsible for assessing any claim by Comstock for additional time to complete the work.

Comstock was aware of AMEC’s role from the tendering stage. AMEC has since changed its corporate designation to Wood Canada Limited, but again, in the interest of continuity with the decision below, it will be referred to as AMEC in these reasons.

(1) The first action [ 3 ] In the first action, Comstock claimed damages against both PCS and AMEC.

As against PCS, it claimed: 1) damages for breach of contract in the amount of $4,581,195; 2) additional damages of $13,500,613 for breach of contract, breaches of collateral warranties, breach of the duty to act in good faith, misrepresentation and negligent misrepresentation; 3) in the alternative, compensation in the amount of $18,081,808 on the basis of quantum meruit for wrongful repudiation of the Comstock Contract or independent of it; and 4) in the further alternative, compensation and/or restitution in the amount of $18,081,808. [ 4 ] As against AMEC, Comstock claimed damages in the same amount of $18,081,808 for: 1) tortious interference with contractual relations and economic interests; 2) in the alternative, inducing breach of contract; 3) in the further alternative, misrepresentation or negligent misrepresentation; and 4) further still, breach of the duty to act in good faith. [ 5 ] In addition to the above and as against both PCS and AMEC, Comstock claimed: 1) damages for the wrongful conversion of its personal property, which damages were included in the above amount of $18,081,808; and 2) punitive, aggravated and/or exemplary damages. [ 6 ] Finally, Comstock claimed interest and HST on all damages plus costs. [ 7 ] PCS counterclaimed against Comstock for breach of contract.

It claimed: 1) damages representing the incremental costs incurred to retain another contractor to finish CP-15; and 2) damages to cover the cost of rectifying Comstock’s deficient work.

[ 8 ] PCS quantified its claim at trial in the amount of $17,565,735. It further asserted a right of set-off in defence of Comstock’s claims. Finally, it also claimed interest and costs.

(2) The second action [ 9 ] The second action consisted of Comstock’s action against PCS under the Mechanics’ Lien Act , R.S.N.B. 1973, c. M-6 . Comstock asserted entitlement to a claim for lien for the amount owed to it by PCS as the owner under the Act . It claimed payment of the sum of $47,714,977 plus HST, interest and costs. In the event that PCS defaulted on payment, it claimed for the statutory relief against PCS’ estate and interest in its lands and premises as set out in the Act . B.

The decision [ 10 ] The trial judge awarded Comstock damages in the amount of $6,731,289, which was broken down as follows: 1) $2,059,676.84 (amount owing from lien holdback) 2) $683,908.61 (payment for June 2010 work) 3) $625,245.09 (payment for July 2010 work) 4) $1,660,500.00 (damages for labour productivity losses) 5) $677,662.00 (damages for extended overhead costs) 6) $58,249.53 (damages for additional direct costs) 7) $29,129.76 (added burdens on additional direct costs) 8) $264,951.00 (termination costs) 9) $134,524.60 (5% profit on $2,690,492, items 4 to 8 above) 10) $537,442.10 (13% HST on $4,134,170, items 2 to 9 above) [ 11 ] The judge dismissed both the PCS counterclaim and the Comstock action against AMEC in their entirety. [ 12 ] The decision did not address costs for any of the claims, nor did it address the interest payable on the damages.

The judge retained jurisdiction to deal with these issues at the request of the parties. Her decision on both costs and interest was released after the hearing of these appeals: HB Construction v. Potash Corporation et al. , 2022 NBQB 59 , [2022] N.B.J. No. 114 (QL) . PCS has appealed the award of pre-judgment interest. Although the issue of costs had been addressed at the hearing of the appeals, two of the parties have asked to be heard further on that subject. The Court will hear the parties with respect to costs on appeal at the same time as it hears the appeal of the aforementioned decision.

[ 13 ] The decision does not address all of the relief claimed by Comstock in its lien action. The appeal of that portion of the decision is dealt with in the companion reasons released concurrently with the present reasons: HB Construction Company Ltd. v. Potash Corporation of Saskatchewan Inc. , 2022 NBCA 40 . II. Factual Context [ 14 ] In 2007, PCS elected to expand its operation at the Penobsquis/Picadilly mine. The estimated value of the proposed expansion was $1.7 billion, which included the contract it would eventually award to Comstock for part of the expansion.

In fact, construction of the compaction plant was valued at $120,000,000, which included the Comstock Contract. Other contractors would be involved with the construction of other components, all under the supervision and management of AMEC.

The incentive for this major investment was a strong global market for potash and compacted potash products, and PCS wished to have the project completed as soon as possible. [ 15 ] The evidence from Clark Bailey, Senior Vice-President of PCS at the time, confirmed PCS’ preference for a lump-sum or fixed-price contract for the construction of CP-15 so the eventual contractor would assume as much as possible of the risk associated with construction.

By the time PCS wished to go to tender in late 2008, however, the engineering and drawings that AMEC was preparing were not sufficiently advanced for it to request lump-sum tenders, but they provided enough information to permit contractors to bid on a cost-plus basis. As a result, it was decided to seek cost-reimbursable tenders. [ 16 ] AMEC was responsible for the tendering process. In order to secure the right to submit a bid, interested contractors were invited to make their presentations to both AMEC and PCS, and a determination would then be made as to who would be asked to bid.

In its presentation, Comstock held itself out as a sophisticated, knowledgeable and well-established contractor in this particular type of industry and indicated it was prepared to begin mobilizing once engineering was 70% complete. CP-15 called for mechanical, heating, ventilation and air conditioning, piping, electrical and instrumentation work. Comstock was aware drawings and related specifications would be voluminous and would continue to be produced and revised as construction progressed. [ 17 ] The Request for Proposals was issued on February 10, 2009. Comstock was among four contractors invited to bid.

All attended a pre-tender meeting and participated in a site walk-through on February 18, 2009. Construction of the structural elements of CP-15 was already underway, but not all of the drawings with respect to the work to be performed under the eventual Comstock Contract were ready for construction purposes. However, as noted, they were sufficiently advanced to permit bids to be sought on a cost-reimbursable basis. [ 18 ] On April 3, 2009, Comstock tendered its bid with a “target” price of $34,943,169. It qualified the bid by what it termed “incentive schemes” related to various levels of performance milestones.

It was not a typical cost-reimbursable bid but rather a target price “to be used for accounting and benchmarking purposes only.” [ 19 ] On April 17, 2009, Comstock reduced its price to $33,937,381 because of a saving obtained from one of its subcontractors. That made it the third-lowest cost-reimbursable bid of the four. [ 20 ] On April 20, 2009, AMEC asked for revised bids in light of refinements made to the scope of work and engineering as reflected on revised drawings.

However, on April 30, 2009, before revised bids were received, AMEC and PCS held an on-site meeting with Comstock representatives to obtain clarifications on Comstock’s bid. Another tour of the site took place. During the meeting, PCS advised Comstock it had decided to ask the four bidders to re-tender on a lump-sum price basis. As the PCS expert explained at trial, when lump-sum bids are requested, contractors are entitled to assume the engineering/design of the scope of work is sufficiently advanced to allow for lump-sum bidding. The trial judge found PCS and AMEC were satisfied this was the case (at para. 13).

Comstock’s Executive Vice-President, Peter Semmens, advised Comstock was prepared to bid on that basis. [ 21 ] On May 1, 2009, AMEC sent a bid clarification letter to the four cost-plus bidders seeking their interest in bidding on a lump-sum or fixed-price basis. All four confirmed their interest and a formal Invitation to Tender was issued on May 30, 2009, with a closing date of June 19, 2009. The contract award was planned for July 31, 2009, with a completion date of May 14, 2010. AMEC issued more revised drawings during this process until June 13, 2009.

The tender closing date was extended to July 3, 2009. [ 22 ] On June 10, 2009, all four contractors attended another site meeting and walk-through. This was a final

opportunity for all to ask their questions of AMEC, seek clarifications and review the tender documents. [ 23 ] On July 3, 2009, Comstock submitted the lowest lump-sum bid in the amount $34,479,169.41. Much to the surprise of PCS and AMEC, that bid was actually lower than its original cost-reimbursable bid and almost the same as its revised bid. As noted, the generally well-known fact in the construction industry, acknowledged by all parties, is that a lump-sum contract entails less risk to the owner because the contractor absorbs most of the risk of unforeseen but typically predictable cost overruns.

It is an accepted practice within the industry, which is not in dispute in this case, that lump-sum bid prices will be higher than cost-reimbursable bids so that the contractor can shield itself from as much of the increased risks as possible. [ 24 ] On July 9, 2009, AMEC wrote to Comstock to seek clarification of its lump-sum bid. Another on-site meeting was held with another walk-through.

The clarification process, which included reviewing additional revised drawings issued by AMEC, resulted in an adjustment to Comstock’s price on July 23, 2009, increasing it to $36,279,170 with a new completion date of May 30, 2010. That bid was still $7.6 million lower than the next closest bid.

The particulars of the four cost-reimbursable and lump-sum bids, together with the differences between the two types of bids, were as follows: Contractor Cost-reimbursable bid Lump-sum bid Increase Comstock $35,496,997 $36,279,170 $782,173 (2%) Contractor #2 $33,678,343 $43,841,202 $10,162,859 (30%) Contractor #3 $36,783,897 $45,912,278 $9,128,381 (25%) Contractor #4 $30,870,869 $48,374,166 $17,503,297 (57%) [ 25 ] The record is not clear as to whether PCS and AMEC were concerned with the significantly lower Comstock lump-sum tender when compared to the others, but there is no dispute it was incumbent on Comstock to do its due diligence and research before submitting its tender to ensure its cost assumptions were correct and there were no serious omissions.

As will be seen, errors with Comstock’s bid were discovered long after the award of the contract, but there is nothing in the record to show PCS and AMEC were aware of them prior to the award. [ 26 ] Comstock’s execution plan, submitted with its tender, projected mobilization by August 17, 2009. Significantly, as will be seen, it proposed to use overhead cranes owned by PCS, which needed to be certified and turned over to Comstock for use during construction.

Scheduling of much of the work depended upon the timely turnover of the cranes. [ 27 ] PCS and AMEC decided to award the contract to Comstock with Clark Bailey being the last person to sign off on the selection on August 11, 2009. The next day, August 12, PCS wrote to Comstock confirming the award of the contract for the amount of $36,279,170 plus HST, but the contract was not signed until December 18, 2009. The parties acknowledge it became effective August 14, 2009. The work was to commence August 30 with substantial completion to be achieved by April 15, 2010, and final completion by May 30, 2010. A.

The Comstock Contract [ 28 ]

Article 1 of the signed document referenced above specified the contract included a number of additional documents such as the drawings, the specifications, the General Conditions (“GC”) set out in the contract and the construction schedule. The GCs relevant to the appeals and discussed in these reasons are attached as Appendix “A.” Comstock’s schedule, including its “baseline” version, was incorporated into the contract and approved by AMEC. Comstock was contractually required to update the

schedule on an ongoing basis for AMEC’s approval. The contract documents also included Comstock’s “Execution Plan,” which specified it would use a 10-tonne and a 25-tonne crane to move materials and equipment during construction. PCS and AMEC were to provide and set up the cranes. Other documents formed part of the Comstock Contract, but these are the most relevant to the issues on appeal. [ 29 ] Following the award of the contract, Comstock held an internal meeting on August 17, 2009, to review job scheduling, change order management and other items.

The minutes of this meeting record that many change orders were expected for this job and that they needed to be managed effectively from the beginning. In order to do this, Comstock recognized it would need to involve excellent change order personnel to manage all trades, including the mechanical and electrical ones. This was required in order to stay abreast of anticipated design and other changes as the work progressed and to comply with the contractual requirements for change order requests.

[ 30 ] On August 20, 2009, Comstock attended a project kick-off meeting with representatives of PCS and AMEC during which the scope of work, drawings and

schedule were discussed. [ 31 ] Comstock mobilized to the site and began its work on August 31, 2009. Two days later, on September 2, it received a further set of up-to-date drawings from AMEC, which reflected further changes to the work. Comstock had only been on site for two days and was already contemplating preparing a submission for an increase to its contract price. This is discussed more fully below but, before this first change order issue is examined, the facts relating to the preparation of Comstock’s first

schedule must be set out because change orders and schedules are closely connected in terms of whether a change order, if justified, impacts a schedule. [ 32 ] Pursuant to GC 19.2.1, Comstock was required to submit its baseline construction

schedule by the end of August 2009. However, AMEC’s construction coordinator did not provide Comstock with the up-to-date information it needed to do that until September 1, 2009, and the deadline for submission of the

schedule was extended to September 8, 2009. Comstock submitted a preliminary

schedule on September 10, 2009, and advised it had a scheduler working on the baseline schedule. Ultimately, the baseline

schedule was produced on September 25 and accepted by AMEC on September 29, 2009, almost one month into a projected nine-month construction period. [ 33 ] On September 25, the same day the

schedule was produced, Comstock submitted a change order to AMEC for $1,172,771 for the pricing changes related to the revised drawings. This was rejected and, after a series of exchanges on the revised price, during which Comstock’s price rose to $1,465,243, the parties eventually settled on $911,000 on November 18, 2009, as reflected in the change order AMEC prepared that day. The contract price increased to $37,190,170.35. However, the official change order was not issued to Comstock until February 2010, largely because of PCS’ delay in approving it. B.

The change order process and scheduling [ 34 ] The main issues in this case are scheduling, productivity and change orders. Many of the claims in Comstock’s action and PCS’ counterclaim are connected to them. They are at the root of many of the grounds raised in the appeals. PCS and AMEC continuously complained Comstock never had sufficient and experienced staff on site to efficiently deal with change orders and construction schedules. [ 35 ] In a lump-sum contract, the contract price and completion date remain the same unless they are modified by an approved change order.

Changes are a normal and expected part of the construction process. The Comstock Contract provided that, when AMEC issued revised drawings that increased the cost or time required to perform the work, Comstock could request change orders to increase the contract price or extend the completion date, but the request required documentary support to show why the revised designs would result in increased costs or construction time for Comstock. [ 36 ] Comstock, PCS and AMEC all anticipated there would be many changes during the project.

If and when a change in work arose, Comstock was required to follow the terms of its contract and demonstrate the change impacted the price and/or schedule. [ 37 ] In the event Comstock determined that a change initiated by AMEC or PCS warranted a change to the price or schedule, it was required, in accordance with G.C. 47.4.2, to provide a notice of claim in writing to AMEC within seven days of receiving a Field Work Order, Contract Change Order, or revised construction drawing.

The Contract provided that Comstock would not be entitled to additional compensation or an extension from PCS unless notice was provided within the time required by GC 47.4.2. The notice provided by Comstock was to include a description of the change in work and an explanation of Comstock’s proposed change in value of the contract price, or the contract schedule, as applicable. [ 38 ] The Contract required Comstock to proceed with any changes in the work regardless of AMEC’s decisions on its claims.

If Comstock was dissatisfied with AMEC’s decision on a given claim, it could indicate that it was proceeding under dispute.

[ 39 ] Comstock senior management understood there was a need for an overall change order manager, as well as two other change order managers dedicated to the electrical and mechanical trades. However, Comstock only staffed the job with one change order manager, who left the site in November 2009. [ 40 ] Following that departure, Comstock’s only change order manager was the less experienced Project Manager, Brian McLellan, who began overseeing the preparation of all change order requests. [ 41 ] Comstock never had a full-time scheduler dedicated to the project.

The two part-time schedulers who worked on this project rarely visited the site, performing most of their work out-of-province from Comstock’s head office in Burlington, Ontario. Comstock’s payroll records show that its schedulers worked sporadically on the project, and not full-time, contrary to AMEC’s recommendation. [ 42 ] As the project progressed, Comstock began issuing claims for additional payment outside the contractual change order process.

PCS and AMEC representatives continuously advised Comstock that changes to the Contract were governed by its terms, and claims needed to be submitted to AMEC using the change order process and be accompanied by the necessary supporting documentation. [ 43 ] Brian McLellan’s evidence was that Comstock did not always follow the change order process, including providing timely notice of claims. C. The weekly coordination meetings [ 44 ] The minutes of the weekly site meetings, which were entered as an exhibit at trial, provide a chronology of events with respect to the issues on appeal.

They were prepared by AMEC and signed for acceptance by Comstock and PCS. Representatives of all three parties were typically in attendance at all such meetings. According to the minutes, the scheduling and productivity requirements expected of Comstock were first discussed early in the project. [ 45 ] Comstock discussed the

schedule internally and knew that it was an integral aspect to its Contract. The evidence confirms that, from the beginning of the bidding process, Comstock senior management knew the

schedule was ambitious and would require special attention, including additional construction and scheduling management as recommended by AMEC. However, Mr. McLellan testified that Comstock senior management never conveyed this information to him. [ 46 ] The Contract required that Comstock submit its initial

schedule 14 days after notification of the contract award – or August 26, 2009 (14 days following the August 12 letter of intent). [ 47 ] By September 8, 2009, Comstock had not submitted a schedule, and AMEC requested the same. Comstock submitted its proposed baseline

schedule and met with AMEC to discuss it on September 17, 2009. Comstock’s scheduler did not attend. The following week, on September 25, 2009, Comstock submitted another baseline schedule, showing a completion date of May 31, 2010, which AMEC accepted on September 29, 2009. [ 48 ] Following approval of the baseline schedule, the Contract required Comstock to submit weekly and monthly

schedule updates to AMEC for approval and in order to track the project’s progress (G.C. 19.3.5). As matters unfolded, the September 25, 2009 baseline

schedule would be the only

schedule approved by AMEC throughout the project. [ 49 ] As early as October 6, 2009 (and on many other occasions throughout the project), AMEC informed Comstock that its

schedule submissions lacked the required information. Moreover, Comstock failed to submit its weekly and monthly schedules in accordance with the Contract.

[ 50 ] As the trial judge noted from a report prepared by Richard Fogarasi, an engineer who reported to AMEC: Pursuant to G.C. 19.3.1 the

schedule had to meet a number of requirements, including among other things, that it be prepared in the Critical Path Method; show each activity duration in a level of detail of two weeks or less, unless it is an ongoing task; be based on early start and early finish logic for each activity/task; show the start, finish and Commissioning dates and duration for each activity/task; show the float for each activity/task, include an estimate of the number of workers required each week and have estimated manhours per task shown. AMEC’s acceptance of the baseline

schedule submitted September 25, 2009 meant that AMEC accepted it was in general compliance with the requirements of the Contract, although it did not indicate AMEC approved the correctness or adequacy of the program shown in the

schedule (G.C. 19.2.1). [Trial Decision, at paras. 674-675] [ 51 ] The record shows on October 15, 2009, AMEC noted Comstock was continuing to submit improper schedules and requested that it bring its scheduler on site until the scheduling issue was properly addressed. Notwithstanding this request, Comstock did not send its schedulers to the site until April-June 2010, when they began attending the site part-time. [ 52 ] The first weekly

schedule was submitted and discussed at the October 27, 2009 meeting, but the productivity report was still outstanding. This report was required by GC 20.1.1 and 20.3.2.2 on a weekly basis. It needed to set out the progress of the work in terms of the parameters set out in GC 20.1.1 and the time taken as compared to the time allowed and the percentage completed for each item of work. The following job site weekly minutes and related events confirm how the Comstock Contract progressed from that point. Only the parts of the minutes of meetings that are relevant to the appeals are referenced. November 17, 2009 [ 53 ] The baseline

schedule did not correspond to the weekly

schedule submitted by Comstock, which was already behind

schedule in some areas due to access issues largely the responsibility of PCS or AMEC. Comstock’s on-site Project Manager, Mr. McLellan, wrote to AMEC. In his correspondence titled, “Notice of Delays,” he raised concerns with access to the Motor Control Center (MCC) room, the foundations for the cooling towers and delay in accessing the 25-tonne and 10-tonne cranes to be provided by PCS for Comstock’s use in executing the work. Mr. McLellan warned AMEC these delays might impact the construction schedule, but stated Comstock would do whatever it could to lessen that impact.

AMEC’s site coordinator disputed these items would impact the schedule. November 24, 2009 [ 54 ] On November 23, Comstock submitted a

schedule for discussion at the next day’s meeting, but it was not accepted by AMEC because some items were already showing completion dates beyond May 31, 2010. Comstock was asked to resubmit it. The first discussion of a claim process occurred at this meeting. December 1, 2009 [ 55 ] The previous scheduling issue was not resolved, and AMEC insisted on productivity reports. December 8, 2009 [ 56 ] A resubmitted

schedule indicated the crane issues might cause

schedule slippage. Comstock advised it was in the process of assessing the impact of the delays caused by the unavailability of the cranes contrary to the contractual requirement. AMEC again requested productivity reports.

December 15, 2009 [ 57 ] AMEC reiterated its requests for the productivity reports. January 5, 2010 [ 58 ] Comstock advised it would submit a revised

schedule that week. It had been reduced to working 40 hours per week for the previous two weeks as opposed to the contracted 50 hours. January 12, 2010 [ 59 ] Comstock forces were still working 40 hours per week, but it advised there would be no impact on the

schedule because of this. It professed to be constantly “monitoring” the

schedule and estimated the work was 30% complete at this stage. January 19, 2010 [ 60 ] The only entry of note for this meeting was that Comstock was, once again, to provide an update of the schedule. January 26, 2010 [ 61 ] Comstock claimed the work was 35% complete according to its current schedule; however, AMEC advised the

schedule did not show all the required information, and Comstock agreed to review. At this point, Comstock considered increasing its weekly hours and establishing a night shift. AMEC rejected its proposal of a new completion date of June 7, 2010. February 2, 2010 [ 62 ] Comstock’s

schedule was still deficient according to AMEC. It was showing 38.5% completion, but AMEC was of the view Comstock was 10% behind schedule. It again insisted on a weekly

schedule for review. Comstock demanded faster turnaround times for change order approvals to avoid

schedule delays although it agreed no change order processing had yet held up the work. However, AMEC requested supporting information for Comstock’s claims for delays caused by the crane issues. The “late cranes impact claim ” was calculated by Comstock at $1,547,475 and was primarily related to moving equipment and materials (Trial Decision, at para. 89). Comstock advised the

schedule would be adjusted to reflect the delay in having the cranes operational, but it anticipated a two-week delay for completion of the mechanical work under the contract. February 9, 2010 [ 63 ] It was agreed the

schedule needed to be reviewed and revised. The last

schedule accepted by AMEC was the baseline, which was then showing 40% completion. AMEC advised it still believed Comstock was 10% behind

schedule but could not make a definitive determination without Comstock’s accurate updated schedules, which had to be submitted in time for each weekly meeting. Between the baseline and the current schedule, there was a loss or discrepancy of 30,000 man-hours. The biggest concern was the electrical work. Comstock advised the night shift would begin pulling cable that evening. It was thought that the earned man-hours needed to increase for the

schedule to be met and that 12,000 man-hours per week would be required for the following six weeks. There were many change orders in circulation, and Comstock again requested quicker approval to avoid

schedule delays. However, once again, Comstock agreed that none of the outstanding change orders had yet held up the work. AMEC reminded Comstock the IFC (issued for

construction) drawings gave Comstock the authority to proceed with the work, and approval of change orders was only required for out- of-scope work as provided in the Comstock Contract GCs and Terms. Comstock disagreed with this position. AMEC was still in the process of reviewing the claim related to the cranes when Comstock confirmed there were no other pending or anticipated claims provided the outstanding change orders received timely approval. February 16, 2010 [ 64 ] Comstock’s updated

schedule showed 38% completion and it claimed to be achieving 3% completion per week. AMEC thought this

schedule was unrealistic and stated that a scheduler needed to be on site full-time to produce more realistic schedules. The change order debate continued, and the status of the cranes claim remained unchanged. February 23, 2010 [ 65 ] Comstock now claimed 47% completion, but AMEC again challenged the accuracy of this statement in the absence of a revised schedule. It again requested productivity reports for comparison with the revised schedule, once submitted. Many change orders had been approved for approximately $960,000 with another $500,000 worth still awaiting approval by PCS.

The cranes claim was still under review; however, on February 19, 2010, AMEC agreed the late delivery of the cranes had caused cost impacts and offered to settle that claim for $457,000 on a “without prejudice” basis. On February 23, 2010, Comstock countered with $1,253,673, but AMEC refused to budge on its offer. March 2, 2010 [ 66 ] AMEC once again requested an updated and accurate schedule, recovery plan and cost implications. AMEC believed Comstock was 38% complete, but Comstock argued it was 42% complete, both figures being lower than the figure put forth by Comstock at the February 23, 2010 meeting.

Comstock’s new proposed completion date of July 7, 2010, was to be reviewed but, once again, AMEC wanted Comstock’s scheduler to be on site full-time. [ 67 ] Later in March, it became apparent Comstock was in trouble and could not finish the Contract on time. AMEC expressed the need for Comstock senior management to intervene. Comstock sent additional estimators and its Senior Vice President, Brian Guite, to the site to oversee the project and help manage the Contract. March 9, 2010 [ 68 ] A major

schedule discussion took place during this meeting. AMEC indicated the percentage of Comstock’s alleged completion was not accurate based on field observations. Major equipment was unaccounted on the schedule, and activities were not linked. The discussion then centred on hours of work. The minutes reflect earned-to-date hours of 117,959, burned-to-date hours of 186,229 and budget completion hours of 280,056 with an estimated burned by completion hours of 442,426. This meant that Comstock was taking far more time to do the work than it had originally contemplated when bidding on the contract.

Comstock reported a total earned percentage of completion of 42.1% on the base contract for the prior week with 38% completion overall. For the current week, it claimed 45% on the base contract and 41% overall. It set its productivity at 63.3%. AMEC noted the last accepted baseline

schedule dated back to September 2009 and without an accurate update, activities could not be planned. Once again, AMEC told Comstock to get its full-time scheduler on site and reminded Comstock of the “promises” contained in its initial proposal, which secured the contract for it and had not been fulfilled. Those promises included having a full-time scheduler on site. Comstock gave the assurance this individual would be on site Mondays and Tuesdays in the future. Comstock submitted more supporting information on the cranes claim. AMEC reviewed it and made a counteroffer to Comstock’s last number.

Negotiations continued, but the claim remained unresolved. March 16, 2010 [ 69 ] It was agreed a separate scheduling meeting would be held the next day, but it was not held until March 24 as discussed below. Nevertheless, AMEC rejected Comstock’s proposed revised schedule, which showed a completion date of August 11, 2010. There was no further word on the cranes claim.

March 23, 2010 [ 70 ] Comstock was to provide the construction team with a two-week plan as of April 1, 2010. March 24, 2010 [ 71 ] At this special scheduling meeting, AMEC voiced grave concerns. It stated that, if Comstock’s

schedule was correct, the entire project was in big trouble. Comstock was now admitting to a significant error relating to 30,000 hours for scaffolding and labour, which should not have been part of the schedule. This error had the effect of pushing the completion date out to August 2010, but Comstock insisted it could complete the work by July 15, 2010. It promised to have a workable

schedule by March 27. AMEC rejected the July 15 completion date. March 29, 2010 [ 72 ] There was a further scheduling review meeting, during which AMEC questioned Comstock’s overall completion estimate of 59%. March 30, 2010 [ 73 ] Comstock now said the work was 50% complete, but AMEC believed the number was lower. AMEC again asked when it could expect to receive productivity reports, and Comstock stated it would “start” submitting them the following week. AMEC had received Comstock’s response on the cranes claim, and the minutes stated the claim was expected to be resolved.

A new completion date was set at July 15, 2010, but AMEC requested Comstock provide the details of all costs associated with having to remain on site beyond the original completion date of May 31, 2010, as well as the cost of recovery and details of any costs associated with doing whatever was necessary to pull the

schedule back to the original completion date in accordance with GC 22 (acceleration of work). AMEC indicated if Comstock believed AMEC was responsible for any of these costs, it needed to identify which portion and the rationale for attribution to AMEC. The record discloses the Comstock representative did not sign off on these minutes. On April 1, Comstock submitted a revised

schedule showing a completion date of July 16, 2010. April 6, 2010 [ 74 ] The night shift was expected to complete cable pulling by the end of April. That work was 50% done. Productivity reports were made available to AMEC, and Comstock advised it would provide its extended

schedule impact costs later. There were numerous additional change orders under review, and the cranes claim was still not resolved. Until this point, the minutes had always recorded no other claims were anticipated pending timely approval of change orders. That note was not in these or subsequent minutes. All other pending claims were deferred to Brian Guite, of Comstock, who was to respond following this meeting. April 13, 2010 [ 75 ] Comstock advised productivity reports were available for AMEC to review. Comstock indicated it would continue with the night shift until the end dates were achieved.

The current end date for the project was July 15, 2010, which meant there were 14 weeks remaining. Comstock added 100 people to its workforce the previous week. It had not achieved its desired percentage of completion and was reviewing its performance. It was showing an overall completion of 56.45% and was forging ahead with the July 15 completion as the goal. There were still many outstanding change orders. Comstock was now indicating any further late decisions could affect the

schedule as the end date was approaching. There was still no change on the cranes claim status. Comstock had still not submitted its extended

schedule cost impact analysis. Brian Guite advised there were no other pending or anticipated claims. However, three days later, he took a different position in his letter of April 16, 2010.

Mr. Guite’s letter of April 16, 2010 [ 76 ] In his April 16, 2010 letter to AMEC’s project and construction managers as well as to PCS’ Executive Vice- President, Mr. Guite claimed damages of approximately $8.5 million, which included $2 million of subcontractor cost overruns and a net project delay of three months beyond the July 15, 2010 date. He attributed the delays to a number of issues, none of which, in his view, was the responsibility of Comstock. These included the lack of quality and reliable tender documents (now some 12 months after the fact), the lack of availability of the cranes and their numerous breakdowns once they were made available, the lack of access to a Master Project

Schedule and delays associated with the MCC room. His letter went on to argue AMEC had placed itself in a position of conflict of interest and needed to be removed from further participation as future discussions would relate to determinations of claims and requested time extensions, which arose from actions taken by AMEC. He requested the disputes be submitted to mediation and, failing resolution, Comstock and PCS could go to arbitration. This letter was copied to Comstock’s lawyer. April 20, 2010 [ 77 ] AMEC rejected the proposed July 15, 2010 end date.

Comstock claimed a current completion rate of 60.89% with 4.4% achieved the previous week. It claimed to be constantly monitoring and reviewing the schedule. AMEC expressed concern with the achievability of the May 31, 2010 end date and noted it had never formally approved the July 15 date. Comstock indicated it would continue with its night shift until milestone dates were achieved. The same note as in previous minutes continued to be recorded with respect to the many outstanding change orders and late decisions affecting the

schedule as the ultimate end date approached. The cranes impact claim was noted to be included in the claim for the extended

schedule cost impacts reflected in Mr. Guite’s letter of April 16, 2010. April 27, 2010 [ 78 ] AMEC confirmed its rejection of the July 15, 2010 end date and reaffirmed the May 31, 2010 date. Comstock was now claiming 64.15% completion and noted it had achieved 3.2% the previous week. AMEC requested immediate notification from Comstock if the proposed July 15 end date was not achievable, and Comstock indicated it felt it would meet that date. It is not clear from these minutes where that left the April 16, 2010 Guite letter. Comstock’s biggest concerns related to ductwork and insulation.

Comstock noted it was “pushing hard.” AMEC expressed concern certain activities’ end dates were being pushed out until there was no “float” left in the overall schedule, quickly eliminating any time within the

schedule to complete late work and get back on schedule. Once again, there were still many outstanding change orders. As previously noted, all pending and anticipated claims were addressed in Mr. Guite’s letter of April 16, which was superseded by his letter of April 28, 2010. Mr. Guite’s letter of April 28, 2010 [ 79 ] On April 28, 2010, Mr. Guite again wrote to AMEC and PCS, this time requesting specific time extensions.

He asked for 20 weeks relating to the cranes’ availability and breakdown issues, 12 weeks for the late and changed IFC drawings, eight weeks for unresolved change orders and six weeks for extra material handling. On May 4, 2010, AMEC responded and asked for particulars of these costs and

schedule impacts together with a revised

schedule and the quantification of the additional costs. [ 80 ] That day, May 4, Mr. Guite provided the following particulars of Comstock’s claim to AMEC in writing: 1. Cranes issues: $1,547,475 2. Extended duration costs: $1,600,000 3. Drawing revisions from bidding to construction: $1,500,000 4. Unresolved change orders: $1,300,525 5. Additional overtime/acceleration: $3,500,000 6. Tender v. as built quantities: $800,000 7. Extra material handling: $1,100,000

8. Subcontractors: $2,500,000 9. General and miscellaneous: $1,560,000 10. Late responses and critical items: $600,000 [ 81 ] Admittedly, most of the particulars appear to be “rounded” numbers but, in any event, the total claim was now slightly over $16,000,000, almost twice the amount claimed two weeks earlier in the April 16 th letter. Mr.

Guite offered to accommodate what he labelled PCS’ accelerated completion date but with the additional manpower required to do that, which he estimated at more than 400 people as opposed to the 180 for whom Comstock had budgeted, he advised AMEC it would be unreasonable and unfair to expect Comstock to continue spending millions of dollars to do this extra or changed work without approving fair and reasonable change orders.

He noted that to this point, AMEC had not approved any change orders for even a single day of extension time and had not processed the claims for what he termed “huge delays and changed conditions associated with the late cranes and revised drawings.” May 4, 2010 [ 82 ] The minutes of this meeting are essentially silent on the events of a few days earlier, as noted above. They simply continue to record that the July 15 completion date was not acceptable to AMEC and Comstock was reporting completion at 66.01% with 1.88% achieved the previous week.

The same notification issued by AMEC for further particulars of the claims is noted. [ 83 ] Also, on May 4, Comstock submitted a letter requesting a five-month extension to the project

schedule and re- asserted its claim of $16 million in extra payment. [ 84 ] On May 5, Mr. Bailey of PCS and Mr. Semmens, of Comstock, had three telephone conversations. Mr. Bailey recorded in his personal notes Mr. Semmens as saying Comstock would not agree to continue with the work on the basis of change orders and a fixed-price contract. However, he recorded that in the last conversation, some ten minutes after the one just referenced, Mr. Semmens called back and advised that he had changed his mind and that Comstock would continue with the Comstock Contract. However, Mr.

Semmens explained Comstock was $9 million underfunded on the project and anticipated a loss of $15 million by completion. PCS was left wondering whether Comstock would continue with the work, but Comstock gave the assurance it would abide by the terms of the contract. [ 85 ] On May 6, 2010, Comstock wrote to PCS and AMEC and provided two options: 1. Complete the work by July 15, 2010, with a change order for $5.2 million; or 2.

Revert to a “standard” work week and achieve completion on November 26, 2010, at an estimated additional cost of $2.6 million. [ 86 ] On May 7, 2010, PCS was now considering, for the first time, terminating the Comstock Contract and retaining another contractor to finish the project. That day, while that discussion was taking place, AMEC advised Comstock that the November 26, 2010 date was not acceptable and that additional details were required in support of the first option. AMEC’s written notice was sent in accordance with GC 47.9.1 and 47.9.3, which deal with change orders and their approvals.

They provide as follows: 47.9.1 Any major or significant Change to the Scope of Work or Changes to the terms of the Contract shall be authorized, documented, executed and incorporated into the Construction Documents by direct issue of a Contract Change Order. All costs shall be authorized, controlled and processed as if for the original Scope of Work. 47.9.3 ENGINEER will determine the validity of any claim submitted by CONTRACTOR when sufficient information and Documentation has been received. If ENGINEER determines the claim to be valid, with or without adjustments, ENGINEER shall issue a Contract Change Order.

Each Contract Change Order shall be numbered sequentially and signed by both parties. Each Contract Change Order shall specify:

a) The Change in the Work, which may be by reference to Construction Drawings, Specifications or other instructions;

b) The adjustment, if any, to the Contract Price, including the method of valuation, and to the Contract Schedule. [ 87 ] On May 8, 2010, Mr. Guite responded to AMEC and advised his position was that AMEC had all the information it needed to make its determination on option one. He accused AMEC of simply delaying, which he said amounted to bad faith in its contract management duties. May 11, 2010 [ 88 ] The minutes of this meeting record Comstock’s most recent

schedule still showed a completion date of July 15, 2010, which continued to be unacceptable to AMEC. Comstock reported completion at 68.46% with 2.45% achieved the previous week. There is no explanation as to why the weekly completion rates do not cumulatively add up from week to week. [ 89 ] The most significant entry for the purposes of this appeal is the verbal notice Comstock gave at this meeting that the completion date was being pushed back to November 26, 2010, and that it would lay off 200 people effective immediately and cancel its night shift.

There was some dispute at trial as to whether the 200-person reduction was actually discussed. AMEC requested written notice of this new information and manpower adjustment. Comstock advised it was proceeding with option two above. It agreed to submit, at AMEC’s request, a new

schedule with the new end date of November 26. All other discussions were postponed until after the new

schedule was received. Mr. Guite also advised more claims could be expected. [ 90 ] On May 13, 2010, AMEC responded to Comstock’s May 8, 2010 letter, wherein AMEC explained why sufficient supporting documentation was required before any change order could be authorized. AMEC clarified that the single page spreadsheet summarizing costs of $5.2 million did not meet the contractual requirements.

AMEC further clarified its May 7, 2010 letter was not a rejection, but an outline of the supporting information required to validate Comstock’s claims. [ 91 ] On May 17, 2010, Comstock issued a letter in reply to AMEC’s May 13, 2010 response. It referred AMEC to its earlier correspondence and its original bid as being its supporting documentation. No further documents were provided. [ 92 ] Comstock submitted a new

schedule on May 16, but it did not mention the November 26 end date. It maintained the July 15 end date for the time being on the basis it was still awaiting approval of outstanding change orders and dealing with continuing engineering changes and was waiting on the availability of overhead cranes as well as the return of components that had been returned to their manufacturers because of defects. [ 93 ] On May 17, AMEC wrote Comstock to express its concerns about Comstock’s ability to even meet its proposed July 15 deadline.

It asked that Comstock submit weekly reports with weekly schedules comparing the prior week’s actual work and planned work and showing the planned work for the following two weeks. AMEC asked for particulars of the work planned but not done and remedial measures to get back on schedule. It asked for planned activities that depended on the receipt of information from AMEC and, finally, a breakdown of daily manpower by trade. Comstock responded by stating it would be happy to bring in additional forces to meet these demands but wanted an approved change order first.

Otherwise, it confirmed the July 15 date would not be achievable. AMEC advised the information sought was not in addition to the contract scope but was requested pursuant GC 20.3.2.1, which states: 20.3.2.1 CONTRACTOR shall submit a weekly report including, without limitation:

a) A three week “windowed” bar graph

schedule for Work in both print form and Primavera electronic file copy. The three week breakdown shall show the planned versus actual for previous week, and the planned Work for current week and following week. The activity breakdown should be such that no activity is longer than 10 Days, and should include all Subcontractor’s Work;

b) Explanations, in point form, for planned activities that did not take place during the previous week and the remedial action planned to ensure the overall

schedule is maintained;

c) Planned activities on the forthcoming two week period that are dependent on outstanding Engineering information, Materials deliveries, or OWNER information should be clearly identified;

d) A compilation/distillation of the information contained in the daily reports;

e) Other information as ENGINEER may require. [ 94 ] On May 17, 2010, Comstock asked for a 12-week extension to the schedule. This request was triggered by a $67,604 quote it sent to AMEC to remove and install force feeders and was accompanied by a request for a change order. Comstock advised there would be additional charges for overhead site expenses after May 31, 2010. In the following days, Comstock would submit more quotes of this nature, all related to the same conditions. AMEC continued to respond Comstock was to proceed with the work under the Comstock Contract.

However, a six-week extension to the May 31 end date was approved, but only for the work relating to the reinstallation of the cooling pumps. May 18, 2010 [ 95 ] The minutes of that day record Comstock had approximately 350 workers on site but was about to lay off 75 people that week. It was also going to cancel the night shift the next day. Comstock’s daily reports were showing a higher number of workers on site than there actually were, and it agreed to review this. Comstock advised it would continue to downsize the workforce given that AMEC had never accepted the July 15 end date.

It indicated it would continue to work toward a November 26 end date under option two. Comstock’s current

schedule was showing 71.93% completion with 3.47% done the prior week. Again, AMEC disputed these figures. AMEC asked why Comstock bothered to submit a revised

schedule if it knew it was not achievable in terms of a July 15 end date. There is no recorded answer from Comstock to the question, but it advised more claims could be expected. These minutes are not signed. [ 96 ] On May 19, 2010, Comstock advised the delay in approval of four change orders had caused construction delays ranging from 24 to 55 days which, it argued, put PCS in breach of contract.

Comstock took the position these delays amounted to new claims and that damages would be ongoing. [ 97 ] On May 20, 2010, Comstock asked AMEC and PCS to have their design engineers attend the weekly coordination meetings to manage the continuing design changes. [ 98 ] On May 21, 2010, executives and senior management of Comstock and PCS met. No one from AMEC was present. The purpose of the meeting was for PCS to hear Comstock’s concerns firsthand.

Bob Quinn, then president of Comstock, indicated that they thought the project was a $60 million job and had become something completely different than the one on which they had bid. Comstock asked to be paid for the work done to date and offered to complete the rest on a time and material basis. Otherwise, if nothing was done, Comstock would revert to a 40-hour week with 250 workers, which would push the end date into 2011. Mr. Quinn advised Comstock had no intention of leaving the job but would be downsizing. [ 99 ] Mr. Bailey of PCS stated he saw three options for consideration: 1.

Terminate the Comstock Contract on the basis of a termination for convenience at this point and complete the work with another contractor; 2. Continue the Comstock Contract with the change order process; or

3. Accept Comstock’s recommendation to pay it for work done to date and complete the project on a time and material basis. May 25, 2010 [ 100 ] The minutes record Comstock did not submit a revised

schedule for this meeting, and it advised it did not know when one might be sent. [ 101 ] On May 30, 2010, Comstock submitted a new schedule, which showed a completion date of October 6, 2010. It again stated it could not account for the volume and timing of changes and time needed to approve changes by AMEC or PCS. It also asked for the status of drawing revisions from AMEC. It advised it could not generate a reasonable

schedule without this. GC 19 provided that time was of the essence, and Comstock took the position PCS was in breach of that GC given the long delays it had caused. [ 102 ] The May 31, 2010 contractual end date passed. June 1, 2010 [ 103 ] At this weekly meeting, Comstock again sought quick turnaround on engineering and drawings in order to continue. AMEC indicated approvals would be provided as soon as possible. The updated

schedule showing the October 6, 2010 end date was discussed. AMEC stated it needed to be revised as the manpower shown for the future critical path was not clear. It was agreed the schedulers for Comstock and AMEC would meet on site to work together. [ 104 ] On June 3, 2010, Mr. Bailey and Mr. Semmens again spoke by telephone. Mr. Semmens advised he anticipated change orders could reach $55-56 million. He was still seeking to move from the fixed-price Comstock Contract to a cost-plus arrangement, but he understood PCS was not budging on this issue.

They also discussed the October 6, 2010 completion date, which both believed was attainable. However, Mr. Bailey believed Comstock’s productivity needed to increase. Mr. Bailey asked Mr. Semmens if Comstock wanted to finish the project or stop and mitigate its losses. Mr. Semmens replied it wanted to finish the job and get back on PCS’ and AMEC’s “good side.” [ 105 ] Mark Neis, an engineer and employee of AMEC, was asked to independently review Comstock’s claim and provide a recommendation for its resolution under the contract. He arrived on site on June 6 to begin this process.

Owen McElhinney was retained by PCS’ counsel to review and advise on some of Comstock’s claims. Mr. Neis believed they would both be working together. Mr. McElhinney set up his office in AMEC’s site trailer. [ 106 ] A third individual, Phil MacKenzie, an AMEC estimator, also came to the site some time before June 9 and prepared a cost

summary report, which indicated the forecasted costs to complete CP-15 stood at $42,805,854, excluding most of Comstock’s claims. The total estimated by Mr. MacKenzie, assuming

schedule creep of five months to the new October completion date, was $58,813,854 using Comstock’s numbers and $49,604,679 using AMEC’s numbers. AMEC was of the view Comstock needed to add 172,100 man-hours to finish the project. In order to complete the work in the five months to the October finish, Comstock would require 173 people on site daily for the duration.

June 8, 2010 [ 107 ] The only entry of note is that AMEC was still in the process of reviewing the schedule. [ 108 ] On June 11, 2010, a meeting was held among representatives of Comstock, AMEC and PCS with senior executives/management in attendance for all three.

Comstock called the meeting to discuss “unresolved issues.” The agenda included a series of claims, which had reached $25.6 million, the largest portion of which related to costs incurred and to be incurred for alleged misrepresentations as to the state of design completeness at the time of tendering together with major design changes since then, which Comstock priced at $19,547,700. It was also looking for extended duration costs, associated with delays and changes, of $4,576,552.

The options Comstock put on the table for discussion were a renegotiated fixed-price contract, a conversion to a cost-plus model or a hybrid of the two. Failing acceptance of one of these options, it threatened to walk off the job and litigate. However, Comstock reconfirmed its commitment to finish the job by October 6. AMEC did not believe this was possible without significant management changes within Comstock. Mr. Neis asked AMEC to review the Comstock proposal and provide a recommendation. Comstock handed over five binders of materials in support of its position.

However, on June 15, 2010, AMEC delegated this review task to Mr. Neis in accordance with GC 12.4. Mr. Neis was also tasked with the negotiation of all claims under the contract. June 15, 2010 [ 109 ] With the Neis review underway, the minutes of this meeting record the revised

schedule was not yet approved by AMEC. It did show at this point that several activities were 100% complete, but AMEC was not prepared to sign off on this. As a result, Comstock asked AMEC for its “punch list” of anything requiring completion, but AMEC refused to do this stating Comstock needed to do its own review. Comstock also wanted AMEC to approve its May 27, 2010 billing, but AMEC indicated further discussion was required before it could give approval. June 22, 2010 [ 110 ] Comstock’s

schedule update of June 18 was still showing October 6, 2010, as the completion date, but it indicated at this meeting it was trying to finish earlier. Once again, AMEC did not accept the schedule, and Comstock advised it was not prepared to spend additional resources on the

schedule if it was not going to be accepted. AMEC stated it could not accept it without knowing the cost implications. [ 111 ] The minutes record the

schedule was showing 80% completion, but AMEC was still in the process of reviewing this. The Neis report of June 23, 2010 [ 112 ] Following the June 11, 2010 meeting, Mr. Neis reviewed the CP-15 documents and Comstock’s claims in detail. He worked independently to review as much of Comstock’s document submission as possible in order to make an unbiased assessment of its claims. Ultimately, Mr.

Neis concluded, based on his review, that Comstock had not proven entitlement to its claims under the Contract because of its failure to link its additional expenses to any change of scope or impacts outside of its control. Given that the main parameters of the project had not changed, he found it disconcerting that Comstock’s current claims were almost equal to its initial contract price. [ 113 ] Mr. Neis concluded Comstock might be entitled to compensation in relation to changed drawings and specifications, the late cranes, the premium portion of overtime labour and major acceleration to complete the work.

His estimate of the claim came to $5,466,609 as opposed to Comstock’s $26,552,459. He calculated an initial entitlement of 51% or $2,803,226. [ 114 ] His view was that Comstock had not provided supporting documents for an extension of the completion date in accordance with the contract requirements, including a

schedule showing cause and effect on the critical path. Based on the information he had, he could recommend, at best, a one-month extension to June 30, 2010. [ 115 ] Mr. Neis then prepared a letter to be signed by AMEC recommending PCS make three payments of $1 million each and grant the one-month extension. The payments would only be made provided Comstock committed to completing the project as soon as possible, and a final determination of all claims would be made once Comstock submitted full and final supporting documents. Mr.

Neis then left the site for three weeks. [ 116 ] On June 26, AMEC advised Comstock it was prepared to recommend PCS pay an additional amount of $2.8 million as a gesture of good faith, subject to claw back depending on the final outcome of the process for completion, but it did not offer an extension date for completion. AMEC made it clear the Comstock Contract terms would not change. It asked for explanations for the current reductions in staff, its non-compliance with work submitted in change order requests or site instructions and it again asked for the “logic” of the

schedule submittal showing the October 6 completion.

[ 117 ] On June 29, AMEC again requested Comstock submit the missing documentation for its schedule, including the 10-day “lookahead” of activities, explanations for work not completed the previous week and the remedial action plan. It also asked for information regarding any of its activities that depended on things such as missing engineering information and material deliveries. In essence, AMEC was still seeking the Comstock Contract deliverables as requested. [ 118 ] Comstock’s response came the next day and was curt.

Unless Comstock received the change order it had requested earlier that month and immediate payment of $6 million toward its claims, it would be unable to provide any of the requested information. June 29, 2010 [ 119 ] The minutes of this meeting record Comstock did not submit any

schedule update. The contract required Comstock to work 50 hours per week, and the minutes record it was doing five-eight hours/day and was about to reduce to as little as four hours/day the following week. It had gone from a high of 400 people on site to 110 direct hires and 76 subcontractor workers. Again, Comstock is noted as saying it was awaiting its change order to continue working as per the terms of the contract and it would be addressing all manpower and scheduling issues in a letter it would soon send to AMEC.

It had begun to remove tools and trailers from the work site and its foreman’s daily reports were showing worker morale and productivity were at an all-time low. [ 120 ] On June 30, 2010, Mr. Semmens wrote a six-page letter to PCS and AMEC executives and managers in response to AMEC’s “good faith” offer of June 26. He reiterated Comstock’s view that PCS had misled it into believing PCS wanted to resolve the problem through AMEC, which continued to be in a conflict-of-interest position. He referred to the May 10 meeting held with PCS in the absence of AMEC and repeated the three options Mr.

Bailey of PCS had stated. He argued the over 2,500 pages of documentation Comstock had provided to support its claim of over $25 million were not properly addressed by AMEC when it came up with its preliminary assessment of $2.8 million. He asked Mr. Bailey to advise which of his three options he wished to pursue. In the interim, he asked that Comstock’s May and June billings be paid with an additional $6 million instead of the amount of $2.8 million proposed by AMEC, to be credited against claims resolutions.

The June 30, 2010 Notice of Default [ 121 ] The day after the June 29 meeting, AMEC sent Comstock a Notice of Default of Contractual Obligations, the salient portions of which stated: This is notice of Comstock Canada Ltd.’s (the “Contractor”) default of the contractual obligations set out in the above mentioned contract, and is instruction to correct the default in the ten

(10) Working Days immediately following the receipt of this notice. Specifically, with reference to the General Conditions of the Contract, GC 46.5.1, in the opinion of the Engineer; 1. Contractor has failed, or is failing, to prosecute the work diligently. 2. Contractor has failed, or is failing, to provide sufficient skilled and qualified labour and supervision. 3. Contractor has failed, or is failing, to provide sufficient Plant or Materials or services. 4. Contractor has failed, or is failing, to complete the work by the completion dates in the construction schedule.

5. Contractor is performing the work in an inefficient manner. 6. Contractor has failed to comply with the instructions of the Engineer with respect to the contractually required format and detail of the Construction

Schedule [GC 19.3.1] and the contents of notice of claims [GC 47.6.1]. Comstock Canada Ltd. is hereby instructed to correct the defaults by July 15, 2010 failing which PCS may, without prejudice to any other right or remedy PCS may have, suspend or terminate Comstock’s right to continue with the Work or terminate the Contract. [ 122 ] Comstock’s response was a 29-page letter authored by Mr. Semmens in which he advised the Notice of Default did not contain sufficient detail such that it gave no direction as to which items needed to be addressed, as required by the Comstock Contract.

He then went on to argue for a minimum net 10-month extension to complete the contract with a projected total cost of $25 million, in addition to the amounts he claimed were currently outstanding, which he assessed at $3.174 million. He requested an immediate payment of $10 million. He advised that, failing acceptance of these terms, Comstock would commence legal proceedings within 90 days. July 6, 2010 [ 123 ] The minutes of this meeting record Comstock did not submit a

schedule update. It confirmed it would revert to a 50-hour work week and, pending a response to Mr. Semmens’ letter, everything was in a hold pattern. However, AMEC sent a reminder to Comstock of the latter’s contractual obligation to provide the updated

schedule notwithstanding the Notice of Default and Comstock’s subsequent threatened litigation. [ 124 ] Following demands from AMEC for an updated

schedule on July 7 and 9, 2010, Comstock submitted one on July 12, which showed a completion date of October 29, 2010. The cover letter stated in part: As requested, attached herewith please find a copy of our updated schedule. Special attention is directed to the following items that cannot be determined or properly reflected in our updated

schedule at this time. Namely: 1. Despite numerous and repeated request[s] for change orders for extension[s] of time to the original contract, we still do not have even a single day extension granted. 2. Ongoing design and engineering changes prevent determinations of realistic completion dates. Please confirm when Comstock will receive this outstanding data. 3. In excess of $4 Million for change orders have already been approved or certified and an additional $2.6 million are pending or outstanding. i.e. about $7 Million of changes, however not a single day of extension of time has been granted to Comstock.

Be also advised that such changes cannot be determined and properly scheduled until we receive the change orders and fair extensions. 4. As of July 12, 2010 a few months after the original completion date, numerous RFI’s [requests for information] remain outstanding, which creates “Holds” on many work areas. Again it is not possible to properly reflect such belated and frustrating disruptions in our attached schedule. 5. Our previous request for acceleration/overtime were not accepted or addressed; accordingly we cannot reflect such mitigated efforts into our schedule. In

summary we reiterate the fact that it is not possible to prepare definitive or accurate schedules without fair, proper and reasonable design/engineering data, viz:

1. Change Orders 2. Final IFC drawings and revised IFC drawings 3. Final IFC specifications and revised IFC specifications 4. Reasonable and timely responses to RFI’s 5. Notice when final IFC data will be provided 6. Confirmation of deleted scope of work 7. Confirmation of any more additional scope of work We respectfully request your urgent provision [of] the above listed information so that we may be in a position to determine the true status for an accurate revised schedule.

A detailed listing or holds, late RFI’s and outstanding change orders will be prepared and issued later this week. [Trial Decision, at para. 173] July 13, 2010 [ 125 ] The minutes of this meeting reference the new completion date of October 29, 2010. The percentage of completion had dropped a bit from the previous meeting. However, Comstock and AMEC continued to point the finger at each other. Comstock insisted on quicker responses to its change order requests while AMEC insisted Comstock needed to provide more timely responses to the information requested of it.

By this point, $4.5 million in change orders had been approved, most of which related to design changes. The energizing of the compaction plant was scheduled for August 20, 2010. [ 126 ] By letter dated July 16, 2010, the project manager for AMEC, Tony Vecchio, responded to Comstock’s July 12, 2010

schedule submission, stating: May we remind you that the purpose of the work

schedule is to provide, along with three-week look-ahead schedules and daily, weekly and monthly reports, the information needed to plan the completion of the work. AMEC has reviewed your listed “items” and finds that they are not relevant to the provision of an updated work schedule. Using the numbering system in your July 12, 2010 letter, we respond as follows: 1. The completion date for the work has not been extended because Comstock has not provided a quantified request for extension of time for completing the Work that meets the requirements of GC 23.3 or that satisfies the conditions of GC 23.8, Critical Path Delays. 2. The

schedule can be updated based on the known Construction Documents at the time. 3. The

schedule can be updated based on the work to complete, which includes changes in the work. There is no need to wait for the

finalization of Change Orders. 4. The

schedule can be updated to show the date that “holds” need to be removed for performance of that part of the work. 5. The Contractor is obliged to take all steps to complete the work as soon as possible at its own expense unless directed otherwise by the Engineer. Consequently, AMEC does not accept that it is not possible to prepare an updated

schedule of the work to complete. Comstock was notified on June 30, 2010 of its default of the Contract with respect to submission of schedules and Comstock is required to correct this default forthwith. [para. 175] [ 127 ] Also, on July 16, Mr. Bailey responded to Comstock’s letter of June 30 and stated his disagreement with Comstock’s allegation of having been “misled” by PCS that there had been an agreement reached on Comstock’s claims or that AMEC was in a conflict of interest. He asked that all future correspondence be directed to AMEC in accordance with the contract.

He concluded by stating that Comstock’s “repudiation of the contract and misuse of without prejudice discussions” did not sit well with PCS and that its claims resolution approach did not reflect good faith, nor did it stand to lead to resolution of the claims. [ 128 ] On July 17, 2010, Mr. Neis wrote to Mr. Bailey to confirm there was a problem with the Notice of Default given to Comstock. His letter stated: Our letter No.8.6.1 E156930-Ltr022 dated June 30 th , 2010 alleges the contractor is in Default without specifying any specifics.

However, to my knowledge the contractor’s methods of construction have been consistent throughout the entire contract. Notwithstanding that the contractor’s performance has been [poor] and that the Contractor is unlikely to complete the Works by the end of October (without a substantial improvement in performance) more detail is required to terminate the Contract for default by the Contractor.

I would also point out the following: i. “GC 46.2 Termination for Convenience” provides seven (7) days continued work and five (5) days to finalize the contract sum. ii. “GC 46.5.1 Termination for Default by Contractor” is effective immediately on issue of a Suspension or Termination Notice. As such, termination under GC 46.5.1 would enable Comstock to just walk away and leave everything! I have walked through the site yesterday and today. Completion by the end of October is possible but not the way the work is being executed by Comstock.

I agree that changes need to be made to ensure completion in a timely manner. [ 129 ] Mr. Neis was reluctant to recommend termination because of the cost involved. [ 130 ] On July 19, 2010, Comstock submitted an incomplete

schedule which was subject to review and change and did not include a finishing schedule.

[ 131 ] On July 20, 2010, Comstock requested pa

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