HB Construction v. Potash Corporation et al, 2020 NBQB 180

SJC-404-2010 IN THE COURT OF QUEEN’S BENCH OF NEW BRUNSWICK TRIAL DIVISION JUDICIAL DISTRICT OF SAINT JOHN BETWEEN: Citation: HB Construction v. Potash Corporation et al 2020 NBQB 180 Date: 10-01-2020 HB CONSTRUCTION COMPANY LTD. (formerly COMSTOCK CANADA LTD.) Plaintiff - and - POTASH CORPORATION OF SASKATCHEWAN INC. and WOOD CANADA LIMITED (formerly AMEC AMERICAS LIMITED Defendants AND BETWEEN: SJC-596-2010 HB CONSTRUCTION COMPANY LTD. (formerly COMSTOCK CANADA LTD.) Plaintiff - and - POTASH CORPORATION OF SASKATCHEWAN INC. Defendant BEFORE: The Honourable Madam Justice M.

Deborah Hackett DATES OF HEARING: January 7, 8, 9, 10, 11, 14, 15, 16, 17, 18, 22, 23, 24, 25, 28, 29, 30, 31, February 1, 5, 6, 7, 8, 11, 12, 13, 14, 15, 19, 20, 21, 22, 25, 26, 27, May 8, October 21, 22, 23, 24, 28, 29, 30, 31, November 1, 4, 5, 12, 13, 14, 15, 28, 29, December 13, 2019.

DATE OF DECISION: October 2, 2020. APPEARANCES : Howard M. Wise, Robert M. Creamer, Q.C., Mark Dunn, Matthew Letson & Jesse-Ross Cohen for HB Construction Company Ltd. Peter T. Zed, Q.C., Patrick Dunn & Laura Boyd for Potash Corporation of Saskatchewan Inc. Fred McElman, Q.C., Conor O’Neil & Clarence Bennett for Wood Canada Limited DECISION HACKETT, J.: INTRODUCTION [ 1 ] The plaintiff in these actions, formerly known as Comstock Canada Ltd., (referred to in this Decision as “Comstock”) was a contractor on a construction project owned by the defendant, Potash Corporation of Saskatchewan (referred to as “PCS”).

The defendant Wood Group Limited, formerly AMEC Americas Limited, (referred to as “AMEC”) was the engineer responsible for the design and contract management of the project. [ 2 ] In the first action, Comstock claims damages from the defendants for breach of contract and negligent misrepresentation, among other causes of action. Comstock alleges the defendants caused it delay that prevented it from completing the work in the contractual timeframe and claims PCS` wrongfully terminated it for default.

It claims damages including amounts it says it is owed for work completed under the contract, as well as for loss of productivity and extended overhead costs it says arise from the defendants’ breaches of the contract and/or the duty of good faith and/or tortious actions. [ 3 ] The defendants deny any liability to Comstock and state that Comstock is solely responsible for its losses on the project. They submit Comstock was dismissed for cause.

PCS claims a set off for the cost of completion and deficiencies against any damages it may owe Comstock. [ 4 ] In the second action, Comstock seeks to recover from PCS amounts held back under the Mechanics’ Lien Act, R.S.N.B 1973, c. M-6 . FACTS [ 5 ] In 2007, PCS embarked on an expansion of its potash mine in Penobsquis, New Brunswick (the Picadilly mine expansion project). The mine expansion project had an approximate value of $1.7 billion. PCS contracted with AMEC to provide engineering, procurement, and construction management (EPCM) services for the project.

PCS had contracted with AMEC to provide these services on several other mine expansion projects throughout North America.

[ 6 ] As part of the overall mine expansion project, PCS built a new potash compaction plant with a value of approximately $120,000,000.00. [ 7 ] In late 2008 the global market for potash was strong. PCS wished to have the new compaction plant built as soon as possible. Mr.

Bailey, then Vice-President of PCS and responsible for the project, testified that PCS preferred lump sum tenders as they allocated the risk to the contractor in the event of an underestimate in the bid. [ 8 ] However, in early February 2009, the engineering and drawings were not sufficiently advanced to issue the tender on a lump sum basis and bids for CP-15 were sought on a cost reimbursable basis. The tender [ 9 ] AMEC was responsible for the tendering of the contract.

Comstock, a contractor out of Burlington, Ontario, was one of four contractors invited to bid on the contract for the mechanical, HVAC, piping, electrical and instrument work for the compaction plant. The contract was known as CP-15 pursuant to a Request for Proposals issued February 9, 2009. [ 10 ] Prospective bidders were invited to a pre-tender meeting and a site walk on February 18, 2009. Comstock participated in this meeting and site walk. [ 11 ] Comstock submitted a bid in the amount of $34,943,170.00 on April 3, 2009.

Comstock reduced the bid amount by $1,005,000.00 based on identified savings on April 17, 2009. [ 12 ] Comstock attended an on-site bid clarification meeting with representatives of AMEC and PCS on April 30, 2009. Comstock’s bid was discussed in detail and a tour of the site took place. Change to Lump Sum tenders [ 13 ] By May 1, 2009, AMEC and PCS had decided that the engineering design work on the compaction plant had progressed sufficiently to proceed with tenders on a lump sum (also referred to as fixed price) basis.

On May 1, 2009 a bid clarification letter was sent by AMEC to all cost-plus bidders asking each to confirm its interest in submitting a tender on a lump sum basis. On May 4, 2009 Comstock wrote to confirm its interest. [ 14 ] The Invitation to Tender was issued May 30, 2009. It indicated a closing date of June 19, 2009, contract award by July 31, 2009 and work under the contract to be completed by May 14, 2010. [ 15 ] AMEC issued several revisions of engineering drawings and specifications referred to as Requests for Contract Action (“RCA”) over the course of the tendering process.

Bidders on the lump sum tender were working from RCA 8. [ 16 ] Comstock and the other contractors invited to submit lump sum bids were invited to another site meeting on June 10, 2009 with AMEC representatives. Issues discussed included the drawings, heat, and site exclusivity. Another site walk through took place. [ 17 ] AMEC issued a revised set of drawings and specifications, RCA 9, on June 13, 2009. The tender closing date was extended to July 3, 2009. Comstock’s lump sum bid

[ 18 ] On July 3, 2009, Comstock submitted its lump sum bid for CP-15. The bid amount was $34,479,169.41. It was the lowest bid by a significant margin. The other three lump sum bids were $43,841,202.00; $45,912,278.00; and $48,374,166.00. [ 19 ] Comstock stated in its tender submission the work would commence on or before August 30, 2009 and the construction period would be 210 working days, based on a five day, 10 hour per day, work week as required by the tender documents.

Substantial completion would be by April 15, 2010 and final completion by May 30, 2010. [ 20 ] Comstock’s bid submission included in Trial Exhibit 1 indicates its estimated peak workforce for contractor and subcontractor forces would be 200 people. Estimated total on-site hours were 250,500 of which 155,000 were for contractor workers, 75,000 were for subcontractor workers and 20,500 were for on-site staff.

Comstock’s Execution Plan [ 21 ] In its Execution Plan submitted with its July 3, 2009 bid proposal Comstock indicated among other things that: • It intended to begin mobilizing August 17, 2009; • It would install a construction elevator in the plant if possible for access to higher elevations; • It would install temporary washrooms located within the building; • The overhead cranes (owned by PCS and intended to be used after construction of the compaction plant as maintenance cranes) would be used by Comstock for material handling to the different elevations; • After the cranes were certified and turned over to Comstock for use during construction it would add a second shift to hoist equipment/materials while day crews would install equipment hoisted the previous night; • The natural gas system included in the scope of work would be installed early in the

schedule to allow use of gas to fuel temporary construction heaters for winter heat. Bid clarification meeting [ 22 ] On July 15, 2009 AMEC held a bid clarification meeting with Comstock representatives to review in detail the tender documents. Another walk-through of the site took place. RCA 10 [ 23 ] RCA 10 was released July 10, 2009. The majority of these drawings were marked “IFC” – Issued for Construction. [ 24 ] On July 23, 2009 Comstock submitted a revised lump-sum bid of $36,279,170.35 based on these new drawings, an increase of $1,162,801.00. Comstock did not revise its May 30, 2010 completion date.

Comstock is awarded the contract [ 25 ] On August 12, 2009, PCS issued a Letter of Intent confirming that Comstock was awarded the contract. Although the contract was not signed until sometime after December 18, 2009, it is agreed by the parties it was effective as of August 14, 2009 when Comstock acknowledged receipt of the letter of intent. [ 26 ] The contract provided work would commence on or before August 30, 2009, substantial completion would be by April 15, 2010 and final construction completion would be by May 30, 2010.

The Contract [ 27 ] The contract contains over 1,000 pages.

Article 1 of the “Agreement for Contract” states:

ARTICLE 1 1. This Agreement together with the following documents: Letter of Intent Service Provider Undertaking Agreement Correspondence 1.1.1. Contractor Offer Introduction Construction Execution Plan

Schedule A –

Schedule of Unit Rates WCB Experience Rate Statement and Letters Certificate of Insurance 1.2 General Conditions General Conditions of Contract Additional Special Conditions 1.3 Scope of Work 1.4 Drawing List (RCA 10) As per Specification List. 1.5 Specification List (RCA 10) As per Drawing List. 1.7 Exhibits Exhibit 1 - Construction Management Plan (CMP) Exhibit 2 - Quality Assurance/Quality Control Exhibit 3 - Administration Forms Exhibit 4 - AMEC/PCS Safety, Health & Environmental Library CD

and the Contract Drawings listed in the Drawing List, together with the Construction

Schedule and the Construction Drawings form the Contract and shall together be referred to hereinafter as the Contract or Contract documents. 2. The Contract Documents shall constitute the entire agreement between the parties for the Work to be performed, and shall supersede and cancel all previous agreements between the parties in regard to the Work whether oral or in writing, whether expressed or implied. 3. The Contract may only be amended as provided in the Contract Documents. [ 28 ]

Article 2 of the Agreement for Contract states: CONTRACTOR undertakes and agrees to perform all the Work as shown or described in the Contract Documents and to do and fulfill everything to be done and performed by CONTRACTOR shall commence on Site on or before 30 th day of August, 2009 and to achieve full and final completion of the Work on or before 30 th day of May, 2010 and CONTRACTOR does hereby agree to perform the Work for the estimated, not to exceed, sum of Thirty-Six Million Two Hundred Seventy Nine Thousand, One Hundred Seventy Dollars and Thirty Five Cents ($36,279,170.35), hereinafter called the Contract Sum, and that there shall be no further charges to OWNER whatsoever other than those expressly provided for in the Contract Documents. [ 29 ]

Article 3 states: OWNER undertakes and agrees to pay CONTRACTOR, in lawful money of Canada, the Contract Sum for the performance of the Work, subject to additions or deductions as provided for in the Contract Documents, and to make payments on account thereof as stipulated in the Contract Documents. [ 30 ] The contract contains numerous General Conditions. These were included with the tender documents. Comstock holds internal contract meeting [ 31 ] On August 17, 2009, Comstock held an internal kick-off meeting in Ontario. Mr.

McLellan, Comstock’s Project Manager and primary fact witness, testified that Comstock was aware RCA 11 was going to be issued at the time of this meeting. [ 32 ] At the meeting, Comstock discussed change order management. The minutes of the meeting reference under the heading “Change Orders/Extras: A lot are expected for this job and need to be managed effectively from the start. All extras are to be logged whether CCL plans to charge for them or not.

Need excellent Change Order Managers. [ 33 ] Under item 5 “Site Personnel, Change Order Management” the minutes state: Need a strong overall Change Order Manager to manage all trades, as well as one for each of Electrical and Mechanical.

On-site Kick-off meeting [ 34 ] Comstock attended a kick-off meeting on August 20, 2009 on site with representatives from the PCS/AMEC project team. The Scope of Work, drawings and

schedule were discussed. RCA 11 issues [ 35 ] RCA 11 was posted to the project’s website on August 28, 2009 and was transmitted to Comstock on September 2, 2009. Comstock mobilizes to site [ 36 ] Comstock began to mobilize to site by August 31, 2009 and mobilization continued into mid- September, 2009. Comstock Submits Baseline

schedule [ 37 ] G.C. 19.2.1 required Comstock to submit its baseline construction

schedule 14 days after the award of the contract, i.e. by the end of August 2009. Doug Breed, AMEC’s construction coordinator for structural, mechanical, HVAC, insulation and piping work, provided Mr. McLellan with the latest equipment status report for compaction plant equipment to be incorporated into the baseline

schedule on September 1, 2009 and requested a response by September 8, 2009. [ 38 ] On September 8, 2009 Mr. Breed wrote to Mr. McLellan and indicated that AMEC did not yet have a baseline

schedule prior to the first contract meeting scheduled for September 14. [ 39 ] Mr. McLellan submitted a preliminary

schedule on September 10, 2009. He indicated a scheduler was on site that day working on the baseline schedule. [ 40 ] Mr. McLellan worked with Matt Semmens, a Comstock scheduler assigned to the project on an “as required” basis to prepare the baseline schedule. Mr. Semmens and another scheduler, Sean Murray, carried out the scheduling work from Ontario primarily. Neither was assigned full-time to the project. [ 41 ] On September 25, 2009 the baseline

schedule was submitted to AMEC and was accepted by AMEC on September 29, 2009.

Schedule updates [ 42 ] Comstock was required under the contract to update the

schedule weekly. AMEC requested the updates be provided 48 hours before weekly coordination meetings that took place on site between Comstock and AMEC representatives. [ 43 ] The

schedule was prepared using Primavera software as required under the contract. As Mr. McLellan did not use Primavera software (her reviewed the schedules in PDF format) the

schedule was updated by Matt Semmens or Mr. Murray in Ontario. They would receive information from the foremen and superintendents on site and input the information into the schedule. Change Order request for RCA 11 [ 44 ] On September 25, 2009, Comstock submitted to AMEC a Change Order request in the amount of $1,172,000 for pricing of changes arising from RCA 11. However, it was not accepted. Comstock and AMEC went back and forth on price. Comstock submitted a revised price for RCA 11 in the amount of $911,000.00 on November 18, 2009 which was signed off on by AMEC and PCS.

A Change Order in that amount was issued to Comstock in February 2010, increasing the contract value to $37,190,170.35.

[ 45 ] Comstock requested from AMEC four copies of RCA 11 and other IFC drawings transmitted after Comstock arrived on site. Comstock eventually obtained copies of these documents before the end of October 2009 and was reimbursed by PCS for the costs. Cranes [ 46 ] As PCS and AMEC were aware, Comstock intended to use for construction purposes two overhead cranes, the 25-ton and the 10-ton crane. These cranes were owned by PCS and would become maintenance cranes after completion of the compaction plant. [ 47 ] The cranes were “rough set” in the compaction plant by September 17, 2009.

Comstock was responsible for installing the cranes and commissioning them. Comstock had to access certain elevations in order to run power to the cranes. This took place some time after October 24, 2009. [ 48 ] The cranes were ready for commissioning by November 9, 2009 however delays arose on their commissioning due to a defect with the 10-ton crane. The 25-ton crane was commissioned and turned over to Comstock on December 1, 2009. The 10-ton crane was not turned over until January 28, 2010 due to a wait for the parts needed to complete its commissioning. Both cranes broke down frequently after turnover.

MCC Room [ 49 ] Comstock was supposed to have access to the MCC room at elevation 141 on October 19, 2009. It was not available as work was still ongoing to pour concrete on the floors. The MCC room at elevation 141 was turned over to Comstock on November 16, 2009. However, the structural steel contractor did not finish the ramp for lifting equipment into the MCC room until November 28, 2009.

Schedule starts to slip [ 50 ] Comstock’s schedules in November, 2009 showed completion of some activities extending past the May 31, 2010 contractual completion date into June 2010. The minutes of the weekly coordination meeting on November 17, 2009 indicate Comstock was behind

schedule in some areas due to “access issues”. AMEC did not accept Comstock’s

schedule submitted for the November 24, 2010 weekly meeting on the basis it showed some items being completed past May 31, 2010. November 17, 2009 Notice of Delays [ 51 ] On November 17, 2009 Mr. McLellan issued a CIC (project electronic correspondence) entitled “Notice of Delays” to AMEC. In the correspondence Mr. McLellan expressed concerns with access to elevation 95, the Motor Control Centre (“MCC”) room, and the foundations for the cooling towers. Mr.

McLellan also raised concerns with delay in accessing the 25-ton and 10-ton cranes and issues with east side cladding. [ 52 ] At the end of the correspondence Mr. McLellan writes: We are bringing the previous item to your attention, at this time, to inform AMEC that there may be a

schedule impact due to the delays. However Comstock will continue to strive to work the affected tasks and areas and lessen the impact on the schedule. [ 53 ] Mr. Breed wrote back. He disputed that the items Mr. McLellan had raised were impacting the schedule. Heat in compaction plant [ 54 ] Comstock was responsible to provide temporary heat to the compaction plant building. The building was not fully enclosed until February 2010. Comstock says it could not heat the building properly as a result and workers were impacted by snow and ice in the building.

[ 55 ] In December 2009 Comstock indicated to AMEC that due to conditions in the compaction plant and lighting outside on pathways it would work eight-hour days rather than the contractually required 10-hour days, five days a week. AMEC did not object. Comstock worked this reduced

schedule between December 14, 2009 and February 2, 2010. The

schedule slips again [ 56 ] The January 24, 2010

schedule showed a completion date of June 7, 2010. AMEC did not accept the schedule. In correspondence Mr. Breed stated incorrect or missing logic ties between activities had caused the

schedule to show incorrect durations or completion dates. He also stated that Comstock had not shown in any of the previously submitted schedules why the completion date would slip past the May 31 st date so AMEC anticipated Comstock would meet the May 31st construction completion milestone. Crane Claim [ 57 ] On January 29, 2010, Mr. McLellan prepared a submission regarding Comstock’s claimed cost impacts in relation to crane issues up to January 28, 2010. He calculated the impact at $1.547 million. At the end of the correspondence Mr. McLellan wrote: Although work has continued the delays in moving equipment and materials have also affected the schedule. The

schedule will be re- planned around the date when the crane is ready for service but at this time the delay to mechanical completion is at least 2 weeks. [ 58 ] AMEC responded February 19, 2010 and stated that it agreed there were cost impacts associated with the unavailability of the cranes but did not agree with Comstock’s assessment of the extent of the impacts on the various trades. AMEC made a without prejudice offer to address the claim in the amount of $457,000. [ 59 ] Comstock replied February 23, 2010 with revised calculations that brought the claim to $1,253,673.78.

It adjusted prior calculations to take into account that the site was shut down on December 9, 2009 and it included additional lost time for when the 10-ton crane was down in February 2010. [ 60 ] AMEC responded to Comstock’s adjusted claims but did not move from its position. No amount was accepted or paid for Crane issues. Comstock begins expressing concern with timing of issuance of change orders [ 61 ] After RCA 11, AMEC continued to issue revised IFC drawings.

Comstock sought and received change orders in relation to design changes and modifications arising from revisions to the drawings and from instructions from AMEC transmitted by way of the CIC system. [ 62 ] By termination on July 12, 2010 approved change orders were at $4.5 million, a substantial portion of which was in relation to design changes. [ 63 ] Starting in early February 2010 the weekly meeting minutes reflect that Comstock began requesting quicker turnaround of change orders so as not to cause

schedule delays. Comstock ’s position, confirmed by Mr. McLellan in his evidence, was that Comstock was not authorized to proceed with changed work until it received a signed change order. AMEC’s position was that IFC drawings were authorization to proceed with the work shown on the drawings and approval was only required for out-of-scope work. [ 64 ] Also beginning in February 2010 Comstock included in its quotations of price for changes to the work a statement to the effect that quick turnaround was required to avoid delay costs and that upon approval of the change order Comstock would adjust the

schedule accordingly. Comstock is 10% behind

schedule as of February 2, 2010

[ 65 ] Comstock’s

schedule submitted for the February 2, 2010 weekly meeting showed a May 31, 2010 completion date. The minutes of this meeting indicate the

schedule showed 38.5% completion and Comstock was approximately 10% behind schedule. Comstock begins night shift [ 66 ] In early February 2010 Comstock commenced a night shift. The weekly meeting minutes indicate that as of February 9, 2010 electrical work was the biggest concern and two crews were to start pulling cable that night. AMEC noted that earned man-hours needed to pick up in order to meet the

schedule and that Comstock required 12,000 hours per week for the next six weeks. [ 67 ] The night shift continued until May 2010. Comstock’s reported hours showing on the weekly minutes indicate it obtained over 12,000 manhours every week until June 1, 2010 after the night shift was cancelled and Comstock began to reduce its work force. Completion date extending to July 2010 [ 68 ] Despite operating the night shift, the

schedule was delayed. The February 26, 2010

schedule showed a completion date of July 7, 2010. At the March 2, 2010 weekly coordination meeting, AMEC indicated that an updated, accurate schedule, recovery plan, and cost implications were required from Comstock. [ 69 ] By correspondence to AMEC dated March 3, 2010, Mr. McLellan stated the anticipated

schedule was extending out to July 15, 2010, and he included cost estimates for extending the project, which totalled approximately $90,000 per week on a preliminary basis. [ 70 ] Mr. McLellan indicated the

schedule was extending out to July 15, 2010 for various (non-Comstock caused) reasons including: late delivery of the dust collection duct which delayed the start of duct installation from November to mid January, which in turn delayed the start of insulation on the duct; delay in the fabrication of the HVAC by approximately one month as there was confusion as to which revision of the specification was to be used. (Mr.

McLellan testified that Comstock saw this as AMEC responsible delay, but AMEC did not agree); three week delay because the 10-ton crane was not available for December and January; areas of the building not being available early in the project; delays in other companies’ schedules such as cladding, concrete, structural etc.; large number of changes on drawings and scope which took a very long time to approve. [ 71 ] The

schedule Mr. McLellan was referencing was not attached to his March 3, 2010 correspondence. However the March 5, 2010

schedule sent to AMEC March 8, 2010 showed a July 15, 2010 completion date. This

schedule was not accepted by AMEC. [ 72 ] The weekly meeting minutes of March 9, 2010 indicate AMEC had a number of concerns regarding the

schedule including questioning the accuracy of the percent complete (Comstock was reporting it was 41% complete overall), major equipment not being accounted for in the

schedule and activities not being linked in the schedule. AMEC stated that without an accurate

schedule it could not plan activities. [ 73 ] At the March 9, 2010 weekly meeting AMEC reiterated its request that Comstock have a full-time scheduler on site. The minutes indicate Comstock’s scheduler was to be on site Mondays and Tuesdays going forward. Mr. McLellan testified that he believed Sean Murray came to site around March or April 2010, and that Mr. Matt Semmens was on site one day a week or so starting in May 2010. [ 74 ] Comstock submitted another

schedule on March 15, 2010. It showed a construction completion date of August 11, 2010. AMEC did not accept the

schedule submitted. It appears a separate

schedule meeting was to be held the next day i.e. March 17, 2010. However there are no minutes of a meeting on that date in evidence.

[ 75 ] On March 22, 2010 Mr. Breed forwarded to Mr. McLellan and others at Comstock a spreadsheet that AMEC had completed for CP- 15

schedule activities that showed 90% or greater percent complete. AMEC provided its assessment of what it believed was a more accurate reflection of current progress. The spreadsheet indicates that in AMEC’s view many of the items that Comstock was showing 90% or greater complete were much less complete. [ 76 ] On March 24, 2010, a special

schedule review meeting took place at which AMEC told Comstock it had “grave concerns with respect to the direction the project was heading. If the

schedule info is correct the project is in big trouble.” [ 77 ] Comstock acknowledged it had incorrectly included 30,000 hours for scaffolding and labour which should not have been part of the schedule. According to Mr. McLellan, this was an error made by Comstock, that had the effect of showing the construction completion date as extending out to August, 2010. However Comstock was still indicating to AMEC it could complete the work by July 15, 2010. According to the minutes, Comstock indicated it would have a workable

schedule by Friday [March 27, 2010]. [ 78 ] On March 29, 2010 a further

schedule review meeting took place. AMEC questioned the 59% overall completion estimate given by Comstock. The

schedule was back to showing a construction completion date of July 15, 2010. [ 79 ] On March 30, 2010, Mr. Bowes, AMEC’s contract administrator, responded to Comstock’s March 3, 2010 letter. With respect to extending the construction completion date to July 15, 2010, Mr. Bowes indicated that AMEC was entitled to a weekly updated

schedule that “meets the criteria set out in G.C. 19.0 of the Contract” and that this

schedule and the supporting information would confirm whether the completion date would extend beyond May 31, and to what extent. [ 80 ] In terms of supporting information, Mr. Bowes requested that Comstock provide cost of the delay, i.e. details of any costs relating to Comstock having to remain on site beyond May 31, and cost of recovery, i.e. details of the costs associated with doing what is necessary to pull the

schedule back to the original contractual finish date as per G.C. 22 (acceleration of the work). Mr. Bowes indicated if Comstock believed AMEC was responsible for any portion of the above cost, it should identify that portion and provide the rationale to attribute costs to AMEC. [ 81 ] On April 1, 2010 Comstock submitted a

schedule that showed a construction completion date of July 16, 2010. The minutes of the next weekly meeting, April 6, 2010, state that the current format of the

schedule was fine but indicates late deliveries were to be incorporated. Comstock submits Notice of Claim and Request for Extension of Time [ 82 ] In April 2010, Brian Guite, Comstock’ Senior Vice-President, Corporate, arrived on site. On April 16, 2010 he wrote to Tony Vecchio, AMEC’s project manager, Wally Roul, AMEC’s contract manager and Mr. Bailey seeking damages of an approximate minimum of $8.5 million and claiming a net project delay of three months (based on a construction completion date of July 15, 2010).

He attributed delays to a number of issues, for which he claimed Comstock bore no responsibility including lack of quality and reliability of tender documents, lack of crane availability and crane breakdowns, lack of access to Master Project Schedule, and delays in the MCC room. [ 83 ] At the end of the April 16, 2010 correspondence, Mr. Guite wrote: In accordance with the contract provisions that suggest that the Project Engineer is to make an initial determination on the above claim and request for time extension, we are prepared to discuss the same with you at this stage.

However, given AMEC’s involvement in respect of the above claim, we suggest that AMEC is in a conflict of interest as it is being asked to make a determination on a claim that emanates from certain actions taken by AMEC and ask that you defer making any determination on that basis and further ask that this claim be sent to mediation as a first step for dispute resolution. If not resolved at that stage, we can then discuss the potential for arbitration. AMEC does not accept Comstock’s April 17, 2010

schedule

[ 84 ] Mr. Breed wrote to Sean Murray on April 20, 2010 and stated that the April 17, 2010

schedule submission, which showed a construction completion date of July 16, 2010 was not accepted by AMEC, as AMEC had not agreed to a July 16, 2010 construction completion date; Comstock had added a

section titled “extras” into the

schedule for additional work that was awarded to Comstock for the contract or claims for additional compensation that had not yet been agreed to by AMEC and AMEC continued to disagree with Comstock’s activity percent complete for some of the equipment and with certain aspects of the

schedule with respect to logic. [ 85 ] Mr. Breed was asked on cross-examination if July 15, 2010 would have been an acceptable date, but not July 16. He responded that neither was acceptable. [ 86 ] The

schedule discussed at the weekly coordination meeting on April 27, 2010 showed a construction completion date of July 15, 2010. Comstock indicated at the meeting that it felt July 15, 2010 could be met. AMEC did not indicate the

schedule was accepted. However, AMEC requested immediate notification from Comstock if the end date of July 15, 2010 was not achievable. Comstock submits a further claim for compensation and extension of time April 28, 2010 [ 87 ] On April 28, 2010, Mr. Guite sent further correspondence to AMEC and PCS. In this correspondence, Comstock requested specific extensions of time, including 20 weeks for late availability of the cranes and subsequent breakdowns, 12 weeks for late and changed IFC drawings, eight weeks for unresolved change orders, and six weeks for extra material handling. [ 88 ] On May 4, 2010 Mr. Vecchio responded and requested further details regarding the alleged costs and

schedule impacts. A revised

schedule and a quantification of the additional costs was requested. [ 89 ] The same day, May 4, 2010, Mr. Guite wrote back to Mr. Vecchio, asking for “ fair and urgent considerations and Change Orders for the severe changes and associated huge additional costs to our negotiated and competitive lump sum tender” for the contract. By this point, Comstock’s claim amount was at $16,008,000.00 broken down as follows: 1. Crane Issues (Net): $1,547,475 2. Extended Duration Costs (CCL): $1,600,000 3. Drawing Revisions (BtC [bid to construct]):$1,500,000 4. Unresolved Change Orders: $1,300,525 5.

Additional Overtime/Acceleration: $3,500,000 6. Tender vs As-Built Quantities: $800,000 7. Extra Material Handling: $1,100,000 8. Subcontractors: $2,500,000 9. General and Miscellaneous Items: $1,560,000 10. Late responses to RFI’s and Critical Items: $600,000 [ 90 ] Mr.

Guite indicated Comstock was willing and able to accommodate what it called PCS’ accelerated completion date however: …with manpower loadings of more than 400 men versus planned levels of about 180 men, extra overtime and second shifts that have an extra cost of over $3.5 million, it would be unreasonable and very unfair to expect [Comstock] to continue expending many millions of dollars on extra or changed works without fair and reasonable Change Orders.

To date the Owner’s consultant AMEC has not issued any Change Orders for extension of time, not a single day, and has not addressed or processed claims for huge delays and change conditions associated with the late cranes and revised drawings.

May 4, 2010 weekly meeting [ 91 ] The May 4, 2010 weekly meeting minutes indicate: Most recent

schedule shows an end date of July 15 th , which is not acceptable to AMEC. Currently showing 66.01% complete with 1.88% achieved last week. Comstock is constantly monitoring & reviewing the

schedule – AMEC is expressing concern regarding the achievability of this end date. CIC to be issued. The current accepted end date is May 31. AMEC HAS REQUESTED IMMEDIATE NOTIFICATION FROM COMSTOCK IF JULY 15 th IS NOT ACHIEVABLE – Comstock feels they will meet this date, the biggest concerns are currently ductwork & insulation. [ 92 ] At item 8.5 of the minutes, AMEC is noted as being “concerned that activities are being pushed out until there is no float left”. [ 93 ] On May 5, 2010 Mr. Bailey spoke with Peter Semmens, Executive Vice President of Comstock in three telephone conversations. Mr.

Bailey’s notes of the phone calls are recorded in an email he sent to Clint Weiland (PCS in-house counsel) and Mark Fracchia, plant manager of the Penobsquis site. In

summary, Mr. Bailey indicated he discussed having a claims person come in on behalf of PCS, but stated that this was in no way a settlement meeting and that Comstock was still obligated to put forth their change order claims in accordance with the contract. Mr. Bailey recorded that Mr. Semmens stated Comstock would not agree to continue the contract with change orders and a fixed price contract. However, Mr.

Semmens called back within 10 minutes and stated Comstock was okay with allowing PCS to introduce a claims person to come in and look at the site and Comstock’s work and claims and they were okay to continue without cost-plus. Comstock presents two options [ 94 ] On May 6, 2010, Comstock sent AMEC and PCS correspondence indicating two options. Option one would be to complete the work by July 15, 2010, with a change order for $5.2 million.

Option two was to revert to a standard work week to achieve a completion date of November 6, 2010 at an estimated additional cost of $2.6 million. [ 95 ] By email dated May 7, 2010. Mr. Fracchia stated to Mr. Bailey regarding Comstock: I think we need to talk about the option of terminating them and bringing another contractor on board. [ 96 ] Mr. Vecchio replied to Comstock’s May 6 correspondence on May 7, 2010. He indicated option two, with a November 26, 2010 end date, was not acceptable. He also indicated AMEC wanted more detailed backup regarding the first option set out in the letter and a resource loaded

schedule demonstrating that the July 15, 2010 date was achievable. Mr. Vecchio cited General Conditions 47.9.1 and 47.9.3 of the contract dealing with change orders and the engineer’s authority to determine the validity of any claims when sufficient information and documentation had been received. [ 97 ] On May 8, 2010 Mr. Guite wrote back. In

summary, he refuted the suggestion that AMEC had not received sufficient information from Comstock to make a determination on the request for a change order as set out in option one. He stated that AMEC was only delaying the process by asking for more information and not requesting to enter into discussions, at a minimum, which Comstock considered to be bad faith in terms of contract management. He indicated that Comstock took Mr.

Vecchio’s letter as a rejection of the request for a change order to support a July 15, 2010 completion date, and in the circumstances Comstock would revert to option two until AMEC made a final determination of the first option. [ 98 ] The minutes of the May 11, 2010 weekly meeting note that the most recent

schedule showed an end date of July 15 which was not acceptable to AMEC. The

schedule was currently showing 68.46% complete. The current accepted end date was May 31. The minutes also state: COMSTOCK HAS GIVEN NOTIFICATION THAT THE END DATE IS BEING PUSHED OUT TO NOV 26TH AND THEY WILL BE LAYING OFF 200 PEOPLE, EFFECTIVE IMMEDIATELY. AMEC REQUESTED WRITTEN NOTIFICATION OF THE NOV 26TH DATE AND MANPOWER ADJUSTMENT. COMSTOCK STATED THEY ARE PROCEEDING WITH OPTION 2 STATED IN THEIR LETTER DATED MAY 6TH, 2010.

[ 99 ] In his testimony, Mr. McLellan disagreed that Comstock stated they would be laying off 200 people effective immediately. He said that Comstock’s head office was reviewing a reduction of their crews and would be telling Comstock when they would be doing it. [ 100 ] Mr. Breed testified that he recalled Comstock stating that they will be laying off 200 people, effective immediately. [ 101 ] At the May 11 meeting AMEC requested a revised

schedule be issued to reflect the new end date (November 26). Comstock agreed to submit it by the end of week. [ 102 ] On May 16, 2010, Comstock submitted a schedule. However, it was not revised to reflect a November 2010 end date. The covering email from Mr. McLellan states: Attached is our updated schedule.

We are maintaining the July 15 end date and have not changed this date at this time and at this time do not have a firm finish date due to the following: 1) Unknown date when the current changes in for approval will be approved. 2) Continuing engineering changes 3) The availability of the overhead cranes is an unknown 4) Bucket Elevator Components being sent back to manufacture, Unknown when these will return. 5) Chutes being sent back to fabricator Unknown when these will return. 6) Open CIC’s unanswered [ 103 ] The next day, May 17, 2020, Mr. Bowes wrote to Mr.

McLellan and stated: Based on a preliminary review of the CP15 – Comstock Construction

Schedule AMEC has concerns regarding Comstock’s ability to complete the Contract Work in a timely fashion, in particular your ability meet the current indicated overall construction completion date of July 15, 2010. Effective immediately, please forward a weekly report with your weekly construction

schedule as follows; 1. A three week lookahead

schedule showing planned versus actual for the previous week, and the planned work for the current week and the following week. The activity breakdown should be such that no activity is longer than 10 days, and should include all Subcontractor’s work. 2. Detailed explanations, in point form, for planned activities that did not get completed the previous week and the remedial action planned to ensure overall

schedule and construction completion date is maintained. 3. Planned activities on the forthcoming two week period that are dependant on outstanding Engineering information, materials deliveries, or Owner information should be clearly identified. 4. A compilation/distillation of the information contained in the Daily Reports for the previous week, in particular daily manpower on site for the period, broken down by trade classification. Continuing with our current submittal schedule, please provide the weekly report and

schedule 48 hours before the CP15 - Weekly Construction Progress Meeting.

[ 104 ] Mr. McLellan responded on May 18, 2010: We would be happy to bring in additional forces to comply with your request for additional submissions. However to complete this we would require a change order for the additional staff required. Upon the receipt of the change order we will comply with your request. In the meantime the July 15 date will be unachievable and we are reviewing the

schedule and will provide a revised

schedule as per contract. [ 105 ] Mr. Bowes responded the same day that the requested submissions were not additional to Comstock’s scope of work but were required by General Condition 20.3.2.1 of the contract. Comstock requests extensions to the

schedule for changes to the work [ 106 ] In May 2010, Comstock began seeking extensions of time in relation to ongoing changes to the work that were being issued by AMEC. Mr. McLellan initially wrote in the extension of time sought on the approved Change Order when it was returned to him signed by AMEC and/or PCS. [ 107 ] Mr. Bowes wrote to Mr.

McLellan and advised this practice of marking up signed change orders was unacceptable and did not comply with the requirement that Comstock give seven days notice of any delay/anticipated delay, pursuant to G.C. 23.3. [ 108 ] Comstock also submitted some quantified requests for extensions of time along with its price quotations for a number of changes that resulted in Change Orders. AMEC accepted that two of these warranted an extension of time. [ 109 ] On May 17, 2010, in response to a request from AMEC for a quotation to remove and reinstall the force feeders, Mr.

McLellan submitted a quote for a total lump sum price of $67,604 and included on the correspondence the following statement: Please Note! Any delay in responding to these changes may result in additional charges for delays or rework. The

schedule will require to be extended by two weeks for the work to be completed on this change. The

schedule will be required to be extended a further 6 weeks after the work associated with this change is completed to complete assembly of Compactors. A further

schedule extension of four weeks is required to install chutes that cannot be accessed due to the above work being completed Based on the above we are requesting a 12 week extension to the schedule. This extension will start 5 days after the receipt of the change order. Additional charges for Overhead Site Expenses shall be extra after May 31 2010 and will be charged under a separate change. [ 110 ] On May 18, 2010, Mr. Bowes responded to the quotation given by Mr. McLellan for the force feeders stating: Brian: Please proceed with this work in accordance with the total lump sum price submitted. Based on your quotation a

schedule extension of 12 weeks to the Contract

schedule end date of May 31st is accepted. This

schedule extension pertains only to the work of the force feeders.

A Contract Change Order will follow. [ 111 ] Also on May 17, 2010 Mr. McLellan submitted a quotation in relation to CCL 9127: reinstall cooling tower pumps. He provided a quote of $52,226. Mr. McLellan wrote: Please Note! Any delay in responding to the changes may result in additional charges for delays or rework. The

schedule will require to be extended by two weeks for the work to be completed on this change. The

schedule will be required to be extended a further 2 weeks after the work associated with this change is completed to compete the alignment. A further

schedule extension of two weeks is required [to] complete the electrical after the alignment is completed. Based on the above we are requesting a 6 weeks extension to the schedule. This extension will start 5 days after receipt of this change order. Additional charges for Overhead Site Expenses shall be extra after May 31, 2010 and will be charged under a separate change. [ 112 ] Mr. Bowes responded on May 18, 2010 stating that Comstock was to proceed with the work in accordance with the total lump sum price submitted and that a

schedule extension of six weeks to the contract

schedule end date of May 31, 2010 was accepted. However, the

schedule extension pertained only to the work of reinstallation of the cooling tower pumps. [ 113 ] On May 19, 2010 Mr. Guite responded to Mr. Bowes’s correspondence regarding the marked-up change orders not being acceptable requests for extensions of time. Mr. Guite called his correspondence on behalf of Comstock a “reservation of rights”. He pointed out the length of delay associated with approval of four change orders (023, 026, 028, 034) ranged from 24 to 55 days and stated that PCS was in breach of the contract in terms of delayed approvals of requested changes. Mr.

Guite wrote that AMEC could “treat the whole issue as a further notice of claim” that the damages incurred are ongoing. [ 114 ] At the end of the letter Comstock stated: “You are already on notice of our request for extensions. Our April 16, 2010 letter requested an extension of time to July 15, 2010. With the more recent rejection of our request for premium time, you have notice of a November 2010 completion date.

Why would Comstock submit a further letter for an extension of time in respect of the above change orders, as AMEC has suggested, when the actual time extensions requested on each change order has been noted on that specific change order?” [ 115 ] On May 20, 2010, Mr. Guite wrote to AMEC and PCS requesting their design engineers attend the weekly coordination meetings and be on site as a means to try to manage ongoing design changes which did not appear to be declining in number. Mr. Guite also asked for a copy of the AMEC/PCS agreement. [ 116 ] Mr.

Guite sent further correspondence dated May 20, 2010 to AMEC and PCS. He stated Comstock was consistently being asked to update schedules and that it could not account in

schedule updates for the volume and timing of changes or the time it would take to approve changes. He included a table setting out the total quantity of drawing revisions between August 2009 to April 2010 and stated it would greatly help if Comstock knew the status of drawing revisions from AMEC. May 21, 2010 Meeting between Comstock and PCS

[ 117 ] On May 21, 2010, a meeting took place in Toronto between Comstock and PCS. No representatives from AMEC were present. Mr. Bailey, Mr. Fracchia and Mr. Frehlich, PCS’ surface project coordinator met with Bob Quinn, then President of Comstock and Peter Semmens. Mr. Bailey testified that PCS agreed to the meeting to hear Comstock’s concerns. [ 118 ] Mr. Frehlich took meeting notes. These notes indicate Mr. Quinn and Mr. Semmens outlined Comstock’s complaints and frustrations with the crane issues and AMEC engineering issues, among other things they believed had impacted Comstock’s productivity and Mr.

Quinn indicated that Comstock thought the project was a $60 million job and that the build was something totally different than what they had bid on. [ 119 ] The minutes indicate Comstock put forward a recommendation that it be paid for work to date and complete the remainder of the job under a T and M (time and materials) contract. Mr. Quinn is noted as stating that if nothing was resolved soon Comstock would have to end all premium time and go to a 40 hour work week with approximately 250 personnel which would push the

schedule out into the new year. He is recorded as stating we (Comstock) have no intention to leave the job, but are downsizing to match engineering. [ 120 ] The minutes indicate Mr. Bailey said PCS had to take this back and find some middle ground in order to make a decision on the path forward. He also stated that if any of the previous finish dates were of major concerned to PCS, Comstock would have heard from PCS long ago. He indicated that basically there were three options: 1. Terminate Comstock’s contract 2. Continue with current contract and use the change order process 3.

Proceed with Comstock’s recommendation. [ 121 ] Mr. Bailey agreed on cross-examination he was referring to termination for convenience at this point. AMEC requests

schedule update [ 122 ] On May 28, 2010 Mr. Vecchio wrote to Mr. Guite indicating Comstock’s

schedule submission for that week was late. He noted G.C. 19.3 (schedule format) and G.C. 20.3.2.1 (weekly reports). [ 123 ] Mr. Vecchio stated that Comstock was required to provide an updated

schedule to be presented and reviewed before the next weekly meeting scheduled for June 1, 2010 and that the

schedule must incorporate the requirements in GC 21.1 (hours of work) including but not limited to a defined critical path, complete with logic and finish/start relationships, and it should reflect the current scope of work including approved change orders and any field work orders. [ 124 ] Also on May 28, 2010 in partial response to Mr. Bowes’ May 17, 2010 request, Mr. McLellan sent a list of planned activities not completed, and planned activities for the next week dependent upon approval. Mr. McLellan noted that a number of items were reliant on AMEC: for example Comstock was waiting for AMEC to advise about modifications and to provide support material for certain chutes. Comstock’s

schedule shows completion dates in October 2010 [ 125 ] On May 30, 2010 Comstock submitted a revised schedule, showing a construction completion date of October 6, 2010. In the accompanying correspondence Mr. Guite again indicated that Comstock could not account for the volume and timing of changes and time it would take to approve changes by AMEC and PCS in its scheduling updates and requested the status of drawing revisions from AMEC. [ 126 ] Mr. Guite wrote: This requested information is key for Comstock to prepare any reasonable form of schedule.

You have not answered our request and as a result, we have not been able to prepare revise schedules. You will recall that GC 19 of the contract makes time of the essence. Here we are some 10 days after our request without a response from you on that request and without an explanation for the non-response. Given that conduct, PCS is in breach of GC 19 and its conduct interfered with her ability to prepare schedules.

Despite your inability or unwillingness to respond to our May 20, 2010 request, we attach an updated

schedule which remains qualified to the extent that further design changes are to come, and further, on the continued impact of cash flow delays and delays with approvals for change orders, changes, RFIs etc. The contractual completion date is not met [ 127 ] The May 31, 2010 contractual completion date came and went. At the weekly coordination meeting on June 1, 2010, it was noted that the construction

schedule showed an end date of October 6, 2010. The minutes reflect that AMEC was of the view the

schedule still required some review and revision of manpower, as the critical path was not clear. AMEC noted Comstock was overmanned. Comstock stated that they were trying to finish early and that a Comstock scheduler would be on-site and would work with AMEC schedulers on this review. Comstock indicated it would be constantly reviewing and reassessing its manpower requirements. Mr. Bailey and Mr. Semmens have another telephone conversation June 3, 2010 [ 128 ] On June 3, 2010, Mr. Bailey had a telephone conversation with Peter Semmens. Mr. Bailey reported in an email to Mr. Fracchia, Mr. Frehlich, Mr.

Weiland and Duane Gingrich, AMEC’s vice president of mining, that Mr. Semmens had indicated he had a lot more change orders to submit, and he knew he was at $41 or $42 million with current base plus change orders to date and he believed that his package would get them up to around $55 or $56 million. [ 129 ] Mr. Bailey’s email notes indicate that Mr. Semmens still wanted to try to work on some reimbursable deal but he clearly understood PCS was continuing with the base plus change order process. [ 130 ] Mr. Bailey’s notes also indicate he and Mr. Semmens talked about the

schedule submittal (i.e. the May 30, 2010

schedule that showed an October 6, 2010 completion date). Mr. Bailey’s notes state: …We believed that October 6, 2010 was an obtainable date. He just needed to keep his productivity up and he could get there affordable. He believes that date is obtainable as well. [ 131 ] Mr. Bailey’s notes also indicate he asked Mr. Semmens: “Does Comstock want to finish this job?” and Mr. Semmens answered “Absolutely yes”. Mr. Bailey then asked: “Would Comstock rather just try and stop the bleeding and/or mitigate their losses at this point in time?” Mr.

Semmens answer was “No, want to finish the job and get back on our good side and AMEC’s good side”. [ 132 ] The conversation concluded with Mr. Bailey and Mr. Semmens agreeing that Mr. Semmens and his team would come to New Brunswick to spend a day or two going over everything they had to present. [ 133 ] On June 7, 2010, Mr. Vecchio responded to the May 20, 2010 letter from Comstock asking for an engineer to be on site. He stated that a mechanical engineer had been assigned to the site team. Mr. Vecchio declined to provide Comstock with a copy of the AMEC agreement with PCS. Arrival of Mr. Neis and Mr.

McElhinney [ 134 ] Mark Neis, a professional engineer and employee of AMEC had arrived on site June 6, 2010 at the request of Mr. Vecchio. Mr. Neis was tasked with reviewing Comstock’s claims in order to make a determination in accordance with the contract. [ 135 ] Around the same time, Owen McElhinney was brought on site by PCS. Mr. Fracchia testified Mr. McElhinney was retained by PCS counsel to review and provide opinions on some of the claims received from Comstock. Mr. Neis testified he understood Mr. McElhinney was to assist him in determining the claim. Mr. McElhinney set up an office in AMEC’s trailer.

The Mackenzie Report [ 136 ] At some point prior to June 9, 2010, Mr. Mackenzie, an AMEC estimator came to site and prepared a report. The report, entitled “June 3 Contract Cost

Summary Report” stated that the total forecast to complete CP-15, including deviations but not including claims, was $42,805,854, of which $2.1 million was miscellaneous deviations (changes) waiting for approval. [ 137 ] The report is broken into two columns, one with the heading “Comstock” and the other with the heading “AMEC”. Total potential claims under Comstock’s column are $16,008,000.

Under AMEC’s column, total potential claims are $6,798,825. [ 138 ] The report states the project total, including deviations and potential claims, due to “schedule creep” of five months (i.e. the project completion extending to October 2010) is $58,813,854 under the Comstock column and $49,604,679 under the AMEC column. [ 139 ] There is a note at the bottom of the first page of the document that states: It was discussed with Cheryl Collins that it is AMEC’s conclusion that Comstock has an additional 172,100 man-hours left to finish the work -If this is the case; based on 200 hours per month you would need 866 man months to complete -To be completed in 5 months, Comstock would need an average of 173 men for the duration to meet the October deadline [ 140 ] On June 9, 2010, Mr.

Vecchio sent this report to Mr. Bailey and others at PCS and AMEC. June 11, 2010 meeting between Comstock, AMEC and PCS [ 141 ] On June 11, 2010, at the request of Comstock, a meeting took place between representatives of Comstock and AMEC, with a representative of PCS present, to discuss “unresolved issues”. Peter Semmens, Mr. Guite, and a Senior Estimator and an Estimating Manager attended on behalf of Comstock. Mr. Bailey and Joe Holmes, mill general superintendent, attended on behalf of PCS. Mr. Vecchio, Mr. Roul, Brad Thompson, construction manager, Mark Thompson, assistant construction manager and Mr.

Neis attended on behalf of AMEC. [ 142 ] Comstock had sent out the proposed agenda for the meeting the day before. It included seven items for discussion (totaling $25.6 million): 1. Out-of-sequence delivery of Owner-supplied equipment and materials as well as double and multi handling … cost: $1,483,981 2. Lack of timely and proper promised cranes (10T & 25T) … Cost: To follow 3. Misrepresentations as to completeness of design at tender time and lack of promised IFC drawings and major changes between Tender and Revised drawings … Cost: $19,547,700… 4.

Extended duration costs due to imposed delays and changes… Cost: $4,576,552 5. Major acceleration (Premium time, 2 nd Shift, additional manpower, extra resources, etc.) to mitigate the imposed delays. Price is included in Item 3 above. We have provided actual back-up for the money spent. 6. Subcontractor’s claims & general and miscellaneous items … Cost: To Follow 7. Comstock has reviewed the approved change order process and we feel that the approval has no real facts to cutting prices.

So, due to the project’s unknown inefficiency factor, we feel we have the right to go back and re-price each change. [ 143 ] Mr. Holmes prepared a

summary of the meeting which Mr. Bailey reviewed during his testimony. The notes indicate that

Comstock presented the following options: • Re-estimate lump sum and stick with current contract, but revised amounts • Convert to cost-plus • Hybrid of above 2 options • Finish as-is and litigate [ 144 ] The notes state that Comstock indicated they can and will finish the job with an October 6, 2010 completion. However, Mr. Vecchio did not believe this was possible unless there were significant changes, i.e. project management. [ 145 ] Mr. Neis proposed the plan forward was for AMEC to review the re-estimate and provide a recommendation to Mr. Vecchio which would be presented to Mr. Bailey.

Comstock agreed to provide its re-estimate to Mr. Neis for review. [ 146 ] Either at or following the meeting Comstock provided AMEC with five binders of documents in support of its claims. Mr. Vecchio indicates AMEC will provide an initial determination of Comstock’s claims [ 147 ] On June 15, 2010 Mr. Vecchio wrote to Mr. Quinn in response to Comstock’s letters dated April 16, 2010 and June 10, 2010. Mr. Vecchio referenced the documents provided by Comstock and also noted that in Comstock’s April 16, 2010 letter it had recorded an expectation that a net delay to the project might be three months. [ 148 ] Mr.

Vecchio wrote: ..it is my intention to issue an initial Determination for your disputed items no later than Friday, June 18 th , 2010. Following receipt and review of the remainder of your supporting documents and your demonstration of entitlement to compensation under the Contract I will prepare a final Determination of the items in dispute. [ 149 ] By correspondence the same day to Mr. Quinn, Mr. Vecchio delegated his authority to Mr. Neis. The delegation reads: Pursuant to

Article 12.4 of

Schedule “B” – General Conditions of the Contract, I am delegating my duties and powers under the Contract to Mr. Mark Neis, Claims Manager, Picadilly Project whose signature appears below with the exception of articles 1.16, 5.2, 12.4, 24.0, 49.0, 50.0, 51.0, 52.0, 53.0 and 56.0. Mr. Neis will be responsible for the negotiation of all claims and disputes under the Contract. [ 150 ] Mr. Neis spent approximately a week reviewing the information Comstock had provided at the meeting, and obtained electronic documents from Al Wilson, Comstock’s estimating manager and Primavera versions of schedules from Matt Semmens. June 18, 2010

schedule update [ 151 ] In the meantime, Comstock’s June 18, 2010

schedule update still showed October 6, 2010 as the construction end date. According to the June 22, 2010 weekly meeting minutes, Comstock stated they were trying to finish early. The

schedule was not accepted by AMEC. Comstock is recorded as stating that they were not willing to spend additional resources on the

schedule if it was not acceptable. AMEC is recorded as stating that it could not accept the

schedule without knowing the cost implications of that acceptance. A formal CIC was to be issued by AMEC, requesting cost implications. [ 152 ] The minutes note that the

schedule was showing 80% complete, but included several activities showing 100% that had not been

signed off by AMEC. A CIC was to be issued by AMEC with clarification of the requirements for 100% completion for items to be commissioned. Mr. Neis’ report [ 153 ] Mr. Neis completed his review. He forwarded a draft of his report to Mr. Bailey and Mr. Gingrich on June 18, 2010. On June 23, 2010, he signed his report and sent it on to Mr. Vecchio. In

summary, Mr. Neis’ report indicated that Comstock may be entitled to compensation in relation to changes to construction drawings, specifications or other documents; lack of crane availability; the premium portion of overtime labour, and major acceleration. His initial estimate of value of Comstock’s claims was $5,466,609.92 (versus Comstock’s claimed amount of $26,552,459.20) and initial estimated entitlement was 51%. Mr. Neis calculated an initial determination value of $2,803,226.94. [ 154 ] With respect to an extension of time, Mr.

Neis indicated Comstock had not provided supporting documents to request an extension of the completion date of the work required in the agreement, and in particular the contractor had not provided a

schedule showing a cause and effect which impacts the critical path. However, he had considered the items in dispute and possible delays to the work and at the most, he could recommend a one month extension to the completion date, i.e. to June 30, 2010. [ 155 ] Mr. Neis prepared a draft of a letter from AMEC to Comstock, along with his report. The letter stated that AMEC was recommending to PCS that it make three payments of $1 million and was granting Comstock a one-month extension such that the new completion date shall be June 30, 2010.

The draft letter also indicated payments shall be made on evidence Comstock Canada Ltd. remains committed to completion of the work at the earliest possible date and a final determination shall be made for the claims once Comstock submitted full and final supporting documents for each of the claimed items. [ 156 ] Although Mr. Neis had been delegated authority for the negotiation of all claims and disputes under the Contract, upon submitting his report to Mr. Vecchio, he went off site for approximately three weeks. Mr.

Vecchio indicates AMEC is prepared to recommend PCS pay Comstock $2.8 million [ 157 ] On June 26, 2010 Mr. Vecchio sent a letter to Peter Semmens. He stated that the information provided by Comstock at the June 11, 2010 meeting was insufficient to provide a final recommendation to the PCS. However, in a gesture of good faith and subject to reduction and/or claw back dependent on the outcome of the complete assessment, AMEC was prepared to recommend to PCS additional payments of $2.8 million. No extension of time was offered. [ 158 ] Mr.

Vecchio concluded: To be clear, payments of any amounts will not be made unless Comstock can provide appropriate support to substantiate its claim. It is anticipated that Comstock will continue to work under the existing contract terms including processing of claims, conducting work relative to any scope changes and executing the work in accordance with the agreed weekly work week. We await explanation of your current de-staffing, non-compliance to work submitted via change order requests, FWOs or site instructions and the logic to support your

schedule submittal that indicates a completion date of October 6, 2010. We will be in touch with details regarding the additional information and supporting materials Comstock will need to provide in order that AMEC carry out the final review of your claims. AMEC continues to seek

schedule information from Comstock [ 159 ] On June 29, 2010 Mr. Bowes followed up on his email dated May 18, 2010 requesting from Comstock submissions regarding the

schedule (three week lookahead

schedule with no activity longer than 10 days; explanations of work not completed the previous week and remedial action planned; activities dependant on outstanding Engineering information, materials deliveries, or Owner information; compilation/distillation of the information contained in the Daily Reports for the previous week). He stated to Mr. McLellan that AMEC had yet to receive the contract deliverables requested.

[ 160 ] Mr. McLellan replied the same day and reiterated his previous response that until Comstock received a change order for the letter delivered to AMEC in June, Comstock would be unable to submit the requested information. No

schedule update submitted for June 29, 2010 [ 161 ] According to the June 29, 2010 weekly coordination meeting minutes, Comstock did not submit an updated

schedule for that week. The minutes also note that the contractor was obligated to work a 50-hour week and was currently working five 8-hour days and was looking at working four 10-hour days starting the next week. Comstock stated they were awaiting a change order to continue the work for this contract and that all manpower and

schedule issues would be addressed in a corporate letter to be issued to AMEC. Comstock responds to AMEC’s initial determination [ 162 ] On June 30, 2010 Mr. Peter Semmens wrote a 6 page letter to a number of people at AMEC and PCS including Mr. Bailey and Mr. Bailey’s superiors in response to Mr. Vecchio’s June 26, 2010 correspondence indicating AMEC was prepared to recommend to PCS additional payments of $2.8 million. [ 163 ] Mr.

Semmens indicated Comstock’s view that it was being led along by PCS into believing that PCS intended to try to resolve the situation and he reiterated Comstock’s view that AMEC was in a conflict of interest. He referred to the meeting between PCS and Comstock, without AMEC present, on May 21, 2010 and stated that Mr. Bailey suggested at that meeting three options for potential resolution: 1. Call in a third party auditor to settle on a cost plus proposal with the negotiated fee. 2. End the current contract and come to a settlement to date and continue to finish on a cost plus basis. 3.

Stay with the current contract and proceed with the claims via legal processes [ 164 ] Mr. Semmens also referred to the June 11, 2010 meeting at which Comstock submitted in excess of 2500 pages of documentation to support their claims (totaling over $25 million). Mr. Semmens went through what Comstock felt were deficiencies in AMEC’s response in providing the preliminary assessment of $2.8 million. [ 165 ] At the end of the letter Mr. Semmens requested Mr.

Bailey provide a written answer as to which of the three options as described at the May 21 meeting PCS wished to follow and a detailed response to its submissions on June 10. [ 166 ] In the interim Mr. Semmens asked that Comstock’s May and June draws be paid immediately with an additional $6 million to be credited towards claims resolution in lieu of the $2.8 million “apparently suggested” by AMEC’s preliminary assessment. Notice of Default [ 167 ] On June 30, 2010 Mr. Vecchio sent Peter Semmens a Notice of Default of Contractual Obligations.

It 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]. [ 168 ] The Notice of Default concludes by stating: Comstock Canada Ltd. is hereby instructed to correct the defaults by July 15, 2010 failing which PCS may, without prejudice to any other right of remedy PCS may have, suspend or terminate Comstock’s right to continue with the Work or terminate the Contract. [ 169 ] Peter Semmens responded to the Notice of Default on July 6, 2010 with a 29 page letter.

Among other things, he indicated that the Notice of Default contained insufficient detail and gave Comstock no direction on what items need to be specifically addressed. [ 170 ] Mr. Semmens then reviewed in detail Comstock’s claims and indicated Comstock believed it was entitled to at least a 10 month extension of time (net) and the projected total claim on a cost versus revenue basis was $25 million, in addition to amounts currently outstanding on the contract which Comstock put at $3.174 million.

He requested an interim payment of $10 million and an extension of time from May to November 2010, failing which Comstock would commence legal proceedings within 90 days. No

schedule update submitted July 6, 2010 [ 171 ] The minutes of the July 6, 2010 weekly meeting note that Comstock did not submit a

schedule update for the week. Comstock indicated it was waiting for Brian Guite to return to site before deciding how to proceed with the schedule. [ 172 ] On July 7, 2010 Mr. Vecchio wrote to Mr. Semmens reminding him that as per the contract Comstock was required to provide an updated

schedule prior to the start of each weekly meeting and that in this regard the

schedule submission was now late. Comstock submits

schedule showing construction completion end date of October 29, 2010 [ 173 ] On July 12, 2010 Comstock submitted a

schedule dated July 9, 2010 showing a construction completion end date of October 29, 2010. In the cover letter, Comstock stated: 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 requested for change orders for extension 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 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 to 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. [ 174 ] The July 13, 2010 weekly coordination meeting minutes state: “hours have been added, percentage complete has dropped a bit, but Comstock states they are still trying to achieve this date [October 29, 2010].” The minutes do not indicate what percentage complete was showing on the schedule. [ 175 ] By letter dated July 16, 2010 Mr. 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. [ 176 ] On July 16, 2010 Mr. Bailey responded to Comstock’s June 30, 2010 letter in which it had indicated it felt PCS was leading it on with respect to its claims. Mr. Bailey stated PCS’ disagreement with Comstock’s position that PCS had agreed to a resolution of Comstock’s claims at the meeting on June 11, 2010, or that AMEC was in a conflict of interest. At the end of the letter Mr.

Bailey referred to Comstock’s repudiation of the contract and misuse of without prejudice discussions at the June 11, 2010 meeting. [ 177 ] On July 17, 2010, Mr. Neis who had returned to site, wrote Mr. Bailey an email attaching a flowchart for termination of the CP-15 contract with Comstock. He 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 pour 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.

Schedule is submitted July 19, 2010 [ 178 ] The final weekly coordination meeting took place July 20, 2010. The minutes indicate Comstock had submitted a

schedule on July 19, 2010 and AMEC was reviewing it. Changes would be made and the finishing

schedule would be submitted. Energization of the compaction plant was scheduled for August 20. [ 179 ] The minutes also indicate that Bill Sargent (Navigant) was in attendance on behalf of Comstock. Mr. McLellan testified that he was a “third party” scheduler that Comstock brought in because of all the complaints from AMEC. He was going to be involved in the finishing schedule. However no finishing

schedule was prepared or submitted, as CP-15 was terminated on July 21, 2010. The contract is terminated [ 180 ] With respect to the decision made by PCS to terminate the contract with Comstock, Mr. Bailey testified he had not wanted to terminate the contract in May 2010 when Mr. Fracchia was suggesting it, as starting with a new contractor always adds cost and time. However, by July 21, 2010 no headway was being made with Comstock. He said he did not think Comstock had a clue how long it would take to finish the contract. [ 181 ] Mr. Neis was delegated to deal with the termination. He invited Mr. Guite and Mr.

McLellan to meet with him and Mr. Fracchia on July 21, 2010. Mr. McLellan and Mr. Guite attended the meeting and Mr. Fracchia handed them a notice of termination of CP-15 signed by Mr. Bailey, and asked that Comstock be off site by 4:30 p.m. that day. [ 182 ] The Notice of Termination states: We are writing further to AMEC’s letter of June 30, 2010 (No.8.6.1 E156930-Ltr022) providing notice of Comstock’s defaults of its contractual obligations. In consultation with the Engineer, we have determined that Comstock has failed to correct the defaults in the 10 Working Days following the receipt of that correspondence.

Despite PCS and AMEC’s efforts to work with you, particularly over the past three months, you have failed to carry out the work in accordance with the provisions of the contract. Due to a number of such contract breaches, which continue to occur, we do not believe you have the ability or intention to complete your obligations under the contract in a timely and cost-effective manner. The fact that the

schedule completion date has passed means that PCS will suffer significant losses which can only be mitigated by bringing the job to completion without further delay. In our view this can only be accomplished by terminating our contract and hiring a third party to complete the work remaining. Accordingly, PCS is terminating the Contract with Comstock in accordance with

section 46.5.2 of the contract effective immediately. This termination is without prejudice to any other right or remedy PCS may have. In order to effect an orderly transition, we ask that you please direct all future communications to the Mark Neis of AMEC. This would

include requests for access to the site and inquiries regarding the return of equipment… Events after termination [ 183 ] The next day, Mr. McLellan met with Mr. Neis who advised that AMEC was hiring another contractor, Lockerbie and Hole, to remove tools from the site and return them to Comstock.

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