North America Construction, 2021 YKSC 5

SUPREME COURT OF YUKON Citation: North America Construction

(1993) Ltd. v. Yukon Energy Corporation , 2021 YKSC 5 Date: 20210201 S.C. No. 11-A0114 Registry: Whitehorse BETWEEN: NORTH AMERICA CONSTRUCTION

(1993) LTD. PLAINTIFF AND YUKON ENERGY CORPORATION DEFENDANT Before Chief Justice S.M. Duncan Appearances: H. David Edinger and Talya Nemetz - Sinchein Counsel for the Plaintiff Morgan L. Burris and Todd Shikaze Counsel for the Defendant REASONS FOR JUDGMENT Introduction [ 1 ] This case demonstrates the perils of parties to a complex construction contract relying on ongoing negotiations while the contractual obligations are being fulfilled, to finalize pricing, design and scheduling.

It also demonstrates the additional costs resulting from a deteriorating contractual relationship in which the trust between the parties is lost. [ 2 ] Yukon Energy Corporation (“YEC”) entered into a contract with North America Construction

(1993) Ltd. (“NAC”) in 2010, for work at the Aishihik Generating Station (“AGS”), located on the Aishihik River, 120 kilometres northwest of Whitehorse (“the Contract”). The purpose of the Contract was to install a third turbine generator and related switchgear and equipment, as well as to install additional power cables for redundancy in order to reduce future reliance on thermal power (liquid natural gas or diesel). The project was called Aishihik Third Turbine and Redundancy Installation Project and was a major capital project for YEC. [ 3 ] Work began in August 2010, before the Contract was finalized.

The parties had not yet agreed upon schedules, including the timing of necessary shutdowns of the generating station by YEC to allow certain work under the Contract to be concluded. Designs of the major project equipment were not yet completed. Final pricing was dependent on scheduling and consequent timing and it also was not established before the contract work began. [ 4 ] Various disputes arose over the course of the Contract, which was eventually completed in December 2011. Many of these disputes were settled. Those that could not be resolved went to trial, then appeal.

The Court of Appeal of Yukon sent four issues to this Court for re-trial. [ 5 ] YEC has paid to NAC a total of $8,058,173.48. This consists of the Contract payments of $7,463,570, less $746,357 in holdback, for an initial amount of $6,717,213. At the first trial, YEC was ordered to and did pay to NAC $1,682,470.48. This amount was reduced by the Court of Appeal of Yukon by $341,510, which NAC returned to YEC. [ 6 ] This second trial was conducted as a partial

summary trial on consent. All examination-in-chief, barring some introductory evidence, was provided in the form of affidavits and exhibits. Cross-examination occurred of certain witnesses by both parties. The parties filed five volumes of a Revised Common Book of Documents, as well as written submissions. The

summary trial was conducted in one week, unlike the first trial which occurred over a period of twenty days. [ 7 ] In order to arrive at the conclusions below, I have reviewed the evidence filed in this trial, and considered the evidence provided on cross-examination of the viva voce witnesses, as well as the helpful submissions of counsel. It is impossible given the technical and detailed nature of the evidence to refer to all of it below. I have restricted my references to the salient points that led to my conclusions.

[ 8 ] The outstanding issues to be determined are:

a) NAC claim for $633,000 for additional work as a result of the change in shutdown periods and new completion date;

b) NAC claim for $119,000 for costs incurred from cables added by YEC during the start-up and commissioning project phase;

c) YEC counterclaim for costs of $206,971 for replacement of two electrical cabinets with open backs as specified by the Contract; and

d) YEC counterclaim for damages for deficiencies in the range of $713,688 and $738,864. Background Facts Introduction [ 9 ] The parties provided a detailed agreed statement of facts. The following sets out those that are most relevant from the agreed statement of facts, as well as from the undisputed facts from the various affidavits filed for this

summary trial. [ 10 ] YEC is a Crown corporation. It owns and operates the AGS, functional since 1975. YEC’s financial performance is approved by the Yukon Utilities Board which determines rates to be charged for electricity. YEC must justify its expenditures to the Yukon Utilities Board. [ 11 ] Aishihik Lake allows for the AGS to be the main water storage facility for the Yukon electrical grid. It stores water that is available to generate electricity during the peak demand period of winter, and during years that are dry.

It is an essential facility to fulfill YEC’s obligation to generate power for the Yukon, especially during the winter. [ 12 ] An important contextual fact is that Yukon is not connected to any other electrical grid, unlike most other jurisdictions in North America. As a result, if the YEC facilities fail, there is no ability for Yukon to purchase electricity from other utilities outside the territory. The reliance of the Yukon population for their electricity on the proper functioning of the YEC facilities is complete.

Overview of Project [ 13 ] Before this 2010-11 construction, the AGS had two turbine generators, uniquely located in a powerhouse 120 metres underground. It was the first underground power plant constructed north of 60 in the western world. [ 14 ] The underground part of the plant is connected by a vertical shaft enclosing an elevator, to an above-ground building containing communication and control equipment, including switchgear.

There is also an above-ground switchyard, where the outdoor part of the substation is located. [ 15 ] The two turbines generate electricity which is transmitted through power cables housed in the vertical elevator shaft, to power transformers in the substation. The voltage of the electricity is adjusted by the transformers and then transmitted into the Yukon electrical grid for distribution. [ 16 ] In 2009, YEC decided to build a third turbine generator, referred to as AH3, which was contemplated by the original design of the power plant in the 1970s.

This additional turbine was to meet the increasing demand for power in the Yukon in an affordable way. [ 17 ] At the same time, YEC planned to twin the power cables connecting the generating floor underground, with the surface, and add separate connections for the power transformers. The purpose of this was to minimize the likelihood of a plant outage and consequent Yukon power grid outage. An eight-hour territory-wide outage had occurred in early 2006, when one of the primary power cables at the AGS failed.

The problem was solved by shutting down the AGS for several days and transferring to diesel power generation for the following six months. [ 18 ] The current cost to replace power generated by AGS with thermal power (that is, diesel or liquid natural gas) is approximately $9,250/hour. [ 19 ] This redundancy project was planned to allow for the new and old cables to operate in parallel to transmit energy. If one of the parts failed, it could be isolated off-line, replaced or repaired, while the other cables continued to operate to maintain power service to the grid.

The redundancy project also included upgrading the switchgear. Contract Process and Relevant Provisions [ 20 ] In January 2010, YEC put the two projects out for tender. The proposed contract included the installation of AH3, to be supplied by YEC, in a tunnel 120 metres underground; the supply and construction of associated civil, structural, mechanical and electrical systems, including a YEC supplied modular, pre-engineered building, new switchgear, and interconnecting cable, electrical and controls systems. [ 21 ] After receiving a number of bids, all exceeding the available budget, YEC cancelled the tender.

It decided to negotiate directly with three of the bidding contractors, including NAC. [ 22 ] NAC is an Ontario company with experience in the construction of dams and generation plants. [ 23 ] In August 2010, YEC accepted NAC’s proposal of $7,136,885 excluding GST, (the “Contract Price”) subject to finalization of:

a) the fan wall design and costs;

b) the size of the camp;

c) the penstock design and costs; and

d) the schedule. [ 24 ] The fan wall was the air handling unit needed to prevent AH3 from overheating while operating. The penstock was the pipes used to transport water into the turbine. The designs were to be completed by other contractors to YEC. [ 25 ] The Contract Price was based on a substantial completion date of June 19, 2011, with one shutdown of six weeks, commencing May 1, 2011.

Shutdown, meaning de-energizing and dewatering the plant, was required in order to do certain work. [ 26 ] YEC carefully planned the timing and length of shutdown periods at the AGS in order to minimize the costs of thermal power that had to be used during shutdowns to generate power, especially in the winter. Generally, YEC shuts down the AGS during the summer months as much as possible and stores water there. While the AGS is shut down, the output of the other two power generation facilities (located in Whitehorse and Mayo) is increased and may require diesel or liquid natural gas generation.

The AGS is relied on more in the winter months because of its greater efficiencies. [ 27 ] NAC began work in August 2010, after YEC issued a limited notice to proceed. Contract negotiations were ongoing at that time. The Contract was finally executed in December 2010. It provided for substantial completion by November 30, 2011. [ 28 ] YEC also advised NAC on October 27, 2010, that there would now be two shutdown periods: first, from June 1-30, 2011, and second, from October 1-21, 2011, with the hope that the October shutdown could be moved to September or eliminated altogether.

YEC acknowledged that NAC was required to be on site for the two shutdown periods. [ 29 ] The contractual provisions reflecting this revised agreement were as follows: 3.3. Completion Date The Contractor will complete the Work on or before November 30, 2011 (the “ Completion Date ”), unless otherwise agreed to in writing by the Agreement Manager, at which time the Aishihik power generating station (including the Work) will be available for commercial operation, that being ready for use or is being used for the purpose intended.

Prior to the Completion Date, YEC will facilitate two shutdowns of the entire facility (the “ Shut Down Windows ”) in order to permit the tie-in of the penstock and substation retrofit work: (

a) The first Shutdown Window will commence on June 1, 2011 and be completed on June 30, 2011. This shutdown will include a penstock dewatering for the purpose of connecting the penstock to the existing upstream plug. With dewatering/watering up of the tunnel shaft and isolation requirements, available working time is reduced by approximately four (4) days. (

b) Subject to the status of [the] Mayo outage, the second Shutdown Window is tentatively scheduled to start on October 1, 2011 and be completed on October 31, 2011. YEC would prefer that a second penstock dewater be avoided if at all possible due to stresses imposed on the shaft rock during the dewatering process. Early completion of the Mayo plant outage may allow for an earlier start/finish to the second Shutdown Window. The Price is based upon a Completion Date of June 19, 2011 with a six-week Shutdown Window commencing May 1, 2011. The Price is subject to adjustment under

Schedule D. [ 30 ]

Schedule D was added to the Contract because NAC advised that the change from one shutdown window to two had additional cost implications, which were at that time unable to be calculated.

Schedule D provided: 1. The Price will be adjusted to reflect the Contractors [as written] actual costs caused by the new Completion Date of November 30, 2011 under

Section 3.3. The Price at

Section 8.1 is based upon the original completion date of June 19, 2011 with a six week shut down window commencing May 1, 2011 [emphasis added]. [ 31 ] It was understood by the parties in December 2010 that further changes to the scope of work would be needed as the project progressed and price adjustments would follow. Sections 4.5 and 4.6 of the Contract allowed for these price adjustments as a result of changes to the work. [ 32 ] The parties exchanged numerous change orders throughout the course of the contract (“CRXs”), all of which were resolved, except for those that are the subject of this litigation.

These CRX claims started as early as November 2010. [ 33 ] The actual shutdowns occurred between June 1-19, 2011, and October 1-19, 2011. NAC remained on site during the summer months of 2011, although they had originally planned to be off-site after post-shutdown activities in July and August 2011, and before pre-shutdown activities in September 2011.

[ 34 ] As the parties were discussing the change in shutdown periods, NAC provided to YEC an estimate of their daily costs of remaining on site longer than originally contemplated by the Contract Price. On September 27, 2010, Lou Landry, NAC’s Vice President-Risk Management estimated NAC’s expected additional costs at approximately $278,000 for six weeks’ work (approximately $6,620/day). [ 35 ] The project was substantially complete in early December 2011. AH3 began generating power on December 6 or 7, 2011.

NAC demobilized shortly after that. [ 36 ] Although YEC noted a number of deficiencies and defects in the completion of the Contract, they refused to allow NAC to remedy them due to their loss of confidence in NAC’s capabilities. This position was upheld on appeal. [ 37 ] The deficiencies and defects form part of the dispute to be resolved here. Overview of the Work [ 38 ] The key mechanical and civil components of the project were:

a) a new above-ground building to house the new switchgear;

b) excavation and civil work to prepare the underground tunnel to house the AH3 turbine-generator and associated equipment;

c) installation of the penstock which brought water to the AH3 turbine;

d) installation of the turbine inlet valve (“TIV”), which controlled the amount of water flowing to the AH3 turbine;

e) installation of the hydraulic pressure units - the high pressure unit (“HPU”) and low pressure unit (“LPU”) - which controlled the TIV and other components of the AH3 turbine;

f) installation of the AH3 turbine and generator;

g) installation of the tailrace, the pipe that transported the water leaving the AH3 turbine;

h) installation of the knife gate, which allowed the flow of water in the tailrace to be stopped downstream of the AH3 turbine; and

i) installation of the fan wall air handling unit, needed to prevent AH3 from overheating when in operation. [ 39 ] The key electrical components of the project were:

a) new power cables connecting AH3 to the substation;

b) new switchgear;

c) new control and protection panels (referred to as the 6F and 6R panels) and cabinets for AH3; and

d) inter-connection of the AH3 unit and its ancillary equipment with the new switchgear and new and existing control, protection and communications systems. Overview of Milestones in the Project and Dates of Completion [ 40 ] YEC and NAC considered the following steps to be part of the critical construction path:

a) the delivery, installation and tie-in of the penstock pipe, part of which had to be below the tunnel floor - completed by October 2011 ;

b) the installation of the new switchgear in the new switchgear building - completed on or about March 9, 2011 - and required communication and control work for the switchgear - completed by October 2011 ;

c) the installation of the new feeder cables in the elevator shaft - completed by April 2011 ;

d) the tunnel floor construction - completed by July 11, 2011 , followed by turbine, generator and related equipment installation - completed by end of August 2011;

e) delivery and installation of the 60” knife gate, which allows the flow of water in the tailrace (where the water exits after going through the turbine) to be stopped downstream of the AH3 turbine - completed by October 2011;

f) final shutdown activities, including penstock and tailrace final connections, switchyard work - completed by October 2011 ;

g) post-shutdown activities, including rewatering of the plant, testing, commissioning and start-up of AH3 - completed by December 6-7, 2011 . Sources of Conflict Penstock Design and Installation and Thrust Block Redesign [ 41 ] YEC contracted with AECOM Canada Ltd. (“AECOM”) for the design of the penstock. Its purpose was to bring water to the AH3 turbine. Due to design changes, the design was not finalized until December 2010. The penstock was ordered and arrived earlier

than anticipated, in early February 2011. However, NAC anticipated it would have to remain on site during the summer months when it had originally planned to be off site because of the penstock design and subsequent installation delays. [ 42 ] The design included the construction of two concrete thrust blocks intended to support the penstock and absorb the force of the water travelling inside the pipe. [ 43 ] The thrust blocks were provided to NAC later than originally anticipated, also as a result of a re-design. The design was finalized and issued to NAC on March 26, 2011.

NAC and YEC ultimately agreed that the thrust block re-design caused 21 days of delay. NAC was compensated according to the Contract, through two change orders – CRX 32 to address the direct construction costs incurred as a result of the change in work and CRX 34 to address the associated

schedule delay costs. [ 44 ] The penstock pipe was divided into nine pieces. Pieces three to eight were to be installed and tested before the thrust blocks were constructed. After the thrust block construction and after the concrete floor was poured over pieces three to eight, NAC would install piece nine. The original plan, as of February 2011, considered the baseline schedule, was to install the TIV (which controlled the amount of water going to the AH3) onto the downstream end of piece nine of the penstock, and then connect pieces eight and nine.

Finally, piece one of the penstock was to be connected, or tied in, to the main intake penstock for the plant, while the plant was dewatered during the June shutdown. The final work to connect pieces one through three was also to be completed at this time. [ 45 ] Pieces three to eight of the penstock were positioned, welded and installed by April 18, 2011. [ 46 ] In April 2011, a decision was made not to use the TIV as the isolation point for the new penstock for AH3 after the rewatering of the plant in June.

Instead, NAC was directed to install a blind flange (also referred to as a dished head) on the downstream end of piece one (not piece nine) of the penstock. This resulted in a change of plans. Pieces one and two of the penstock would now be connected during the October shutdown, at which time the blind flange would also be removed. It was still planned to complete the balance of the penstock work during the June shutdown. [ 47 ] Ultimately, this is not what took place. The penstock was not connected until the October shutdown, four months later than planned in February.

Concrete Fill for the Tunnel Floor Slab Construction [ 48 ] The AH3 generator and turbine equipment could not be lowered into the turbine gallery and positioned until the concrete floor was poured. Before the pour, concrete fill needed to be placed and compacted around the penstock to create a base for the floor. [ 49 ] The Type 4 concrete fill was placed during the week of May 9, 2011. Several days later, it became clear that it was not setting properly as a result of errors made by the supplier of the fill.

The concrete pour for the tunnel floor could not proceed. [ 50 ] The Type 4 fill had to be dug out and replaced. This was completed in early July 2011. As a result, the tunnel floor slab was not poured until July 11, 2011, and the generator, turbine and other equipment could not be lowered and installed until August 1-28, 2011, approximately six months later than planned according to the baseline February 2011 schedule. [ 51 ] NAC brought in its subcontractor to perform the final alignment of the generator, turbine and TIV once it was lowered and in place.

This work started on September 15, 2011, and had originally been planned for May 2011, based on the February schedule. [ 52 ] Three CRX claims were brought by NAC against YEC for extra work NAC was required to perform related to the installation of the turbine and generator. This extra work was performed after August 2011, and as late as November 2011. [ 53 ] NAC was compensated in the amount of $50,000 by its insurer as a result of a claim made for delay and lost productivity from the Type 4 fill issue.

It caused a delay of two months, according to NAC, and required them to be on site during the summer months from July 15 to September 14, 2011. General [ 54 ] YEC was unhappy with the work done by NAC, starting in the spring of 2011. YEC was particularly concerned during the June shutdown with NAC’s failures of workmanship, safety, and efficiencies. A stop work order had been issued to NAC by a regulatory agency on June 9, 2011, for failure to maintain a safe workplace underground. It was in place until June 20, 2011.

NAC’s safety officer resigned around this time. [ 55 ] At a meeting held with NAC on June 19, 2011, YEC expressed their concerns and requested and received copies of the CVs for all NAC supervisory personnel on the project. NAC replaced its site supervisor in June 2011. Thereafter, mechanical work improved but there were still problems with the electrical work, outlined below. [ 56 ] Some of the problems with NAC’s work were outlined in a deficiency list prepared by YEC in November 2011.

After several exchanges with NAC and modifications of this deficiency list, representatives from YEC and NAC conducted a walk-through of the site in March 2012, to confirm their respective positions on the deficiency list. Three more versions of this list were prepared. On July 20, 2012, YEC provided its final response to NAC’s comments on the deficiency list.

Seventy-nine items were identified and agreed to by NAC as constituting deficiencies or defects in the work required to be performed by NAC pursuant to the Contract. [ 57 ] At trial, the number of outstanding deficiencies claimed by YEC was 82 or 83, based on YEC expert Doug Mortimer’s review of the list, and his site visit in July 2012. [ 58 ]

Section 12.1 of the Contract contained an indemnity in favour of YEC for failure of NAC to comply with the terms of the contract.

Section 12.1 provides:

12.1 Indemnity The Contractor will indemnify YEC and its respective directors, officers, employees, and agents from and against all costs, expenses, and liabilities; (

a) Arising out of the failure of the Contractor, the Subcontractors, or the Employees, to comply with this Agreement; (

b) Arising out of or in connection with, whether directly or indirectly, the performance of the Work by the Contractor, the Subcontractors, or the Employees in such manner that is negligent, or a default under this Agreement; and (

c) By the Contractor’s Subcontractors or Employees against YEC, except to the extent YEC has been negligent, or in default under this Agreement. 12.2 Exceptions Notwithstanding

Section 12.1 above, the Contractor will not, in any case, be liable to YEC for consequential damages or loss, including but not limited to, loss of use, loss of profit, loss of business opportunity, goodwill, revenue or downtime. I. NAC’s Claim for $633,000 in Costs Pursuant to

Schedule D Issue [ 59 ] NAC claims $633,510.48 for general conditions costs attributable to 14.5 weeks/102 days of extra time it was on site up to and including November 30, 2011. The issue is the

interpretation of

Schedule D and whether NAC is required to prove on a balance of probabilities that its claimed

Schedule D costs were incurred because YEC changed the

schedule to require two shutdown periods and a consequent new completion date. YEC says NAC has not shown, as required, that its reason for being on site for the additional 102 days was because of the new Completion Date created by the two shutdown windows and that this claim should be dismissed entirely. [ 60 ]

Schedule D, replicated at para. 30 above, provides that the Contract price will be adjusted “ to reflect the Contractors [as written] actual costs caused by the new Completion Date of November 30, 2011 under

Section 3.3 ” of the Contract, replicated at para. 29 above. The addition of

Schedule D was a result of YEC’s change in the shutdown

schedule from one six-week shutdown in May/June to two shutdowns – one in June and one in October.

Section 3.3 of the Contract addressed the shutdown window changes.

Schedule D was an acknowledgement by YEC that NAC would incur certain additional costs as a result of being on site for a longer period of time than originally anticipated. [ 61 ] The difference in

interpretation of the parties revolves around the connection between

Schedule D compensation and the shutdown windows. YEC urges an

interpretation focussed on its understanding of the reason for the Completion Date change – that is, any costs legitimately claimed under

Schedule D must have been incurred as a result of work attributable to the change to shutdown windows, and not for any other reason. In particular, costs are not compensable if they are due to the extended Completion Date (November 30, 2011) for reasons other than the change to shutdown windows. NAC, on the other hand, urges a linear approach – that is, once the contract Completion Date was extended from June 19, 2011, to November 30, 2011, every day spent on site by NAC was to be counted towards costs reimbursement under

Schedule D. NAC argues it is not required to show that the only reason it was on site for those extra days was because of the change to shutdown windows. Brief Conclusion [ 62 ]

Schedule D is to be interpreted to allow compensation of general condition costs for work done as a result of the change to shutdown windows and consequent new Completion Date. NAC is entitled to be compensated under

Schedule D for the 30 days they spent during the October shutdown, doing shutdown activities that, for the most part, could not have been done at other times. The 7% overhead costs and the 7.5% vacation pay costs are not recoverable. The daily calculations are based on NAC’s calculation of $6,210.89/day, revised from the original estimate provided by Lou Landry in 2010. NAC is entitled to recover $164,940.02 in costs under

Schedule D. Analysis of

Schedule D Issue Legal Principles Applicable to

Interpretation of

Schedule D [ 63 ] The Supreme Court of Canada in Sattva Capital Corp. v. Creston Moly Corp ., 2014 SCC 53 , set out the principles applicable to the

interpretation of commercial contracts. As stated by Justice Rothstein: [47] … The overriding concern is to determine “the intent of the parties and the scope of their understanding” ( Jesuit Fathers of Upper

Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744, at para. 27, per LeBel J.; see also Tercon ContractorsLtd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, at paras. 64-65, per Cromwell J.) To do so, adecision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with thesurrounding circumstances known to the parties at the time of formation of the contract.

Consideration of the surrounding circumstancesrecognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not havean immutable or absolute meaning: No contracts are made in a vacuum: there is always a setting in which they have to be placed… .

In a commercial contract it is certainlyright that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis ofthe transaction, the background, the context, the market in which the parties are operating. (Reardon Smith Line, at p. 574, perLord Wilberforce) [48] The meaning of words is often derived from a number of contextual factors, including the purpose of the agreement and the natureof the relationship created by the agreement (see Moore Realty Inc. v. Manitoba Motor League, 2003 MBCA 71, 173 Man.

R. (2d) 300,at para. 15, per Hamilton J.A.; see also Hall, at p. 22; and McCamus, at pp. 749-50). As stated by Lord Hoffmann in InvestorsCompensation Scheme Ltd. v. West Bromwich Building Society, [1998] 1 All E.R. 98 (H.L.): … [57] While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowedto overwhelm the words of that agreement (Hayes Forest Services, at para. 14; and Hall, at p. 30).

The goal of examining suchevidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in thewords of the contract. The

interpretation of a written contractual provision must always be grounded in the text and read in lightof the entire contract (Hall, at pp. 15 and 30-32). While the surrounding circumstances are relied upon in the interpretiveprocess, courts cannot use them to deviate from the text such that the court effectively creates a new agreement (GlaswegianEnterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), (BC CA), 101 B.C.A.C. 62). [58] The nature of the evidence that can be relied upon under the rubric of “surrounding circumstances” will necessarily vary from caseto case. It does, however, have its limits.

It should consist only of objective evidence of the background facts at the time of theexecution of the contract (King, at paras. 66 and 70), that is, knowledge that was or reasonably ought to have been within theknowledge of both parties at or before the date of contracting. … Whether something was or reasonably ought to have beenwithin the common knowledge of the parties at the time of execution of the contract is a question of fact. [emphasis added]. [64]

Schedule D must be interpreted according to its text, in the context of the whole contract, and the surrounding circumstances. Purpose of

Schedule D [65] The purpose of

Schedule D was articulated by witnesses from both YEC and NAC. Edward Mollard, Chief Financial Officer atYEC, said: 264 Q … A … There was a change to the schedule. The contractors suggested that there was a cost with that. We wanted to - - we wanted theproject to not be held up by it, so that was our remedy in this case, that we could agree to adjust for actual costs subject to thedetermination of what that was. We couldn’t determine the number at the time, so that was the fallback position that we took. [ Read-Ins of the Plaintiff, Tab 2, p. 14] [66] Patrick Maloney, the NAC Senior Project Manager, described the purpose of

Schedule D as: 71. … intended to cover NAC’s actual general conditions (project specific overhead) costs incurred for the extended time it wouldbe required to operate on site as a result of Yukon Energy’s October 27, 2010 requirement that the shutdown windows bechanged from the original window of May 1, 2011 to June 19, 2011 to two separate windows (June 1, 2011 to June 30, 2011 andOctober 1-31, 2011) with Substantial Completion on November 30, 2011. [emphasis added] [para. 71 of Affidavit #1 of PatrickMaloney]. [67]

Schedule D was drafted in a necessarily general way because the parties were unable to determine the costs at the time of

drafting. [ 68 ]

Schedule D was not the only contractual provision related to cost recovery for changes to the Contract. Other contractual provisions provided compensation for extra work and delay such as ss. 4.5 and 4.6. These provisions included overhead costs/general conditions in the compensation amount.

Schedule D provided another contractual mechanism for compensation for additional costs incurred for a particular reason.

Schedule D compensation is restricted to general condition costs. Surrounding Circumstances of the Contract Negotiation [ 69 ] Surrounding circumstances at the time of negotiating the Contract (August-December 2010) included:

a) The Contract Price of $7,136,885 was based on a substantial completion date of June 19, 2011, with a six-week shutdown window starting May 1, 2011, until that understanding changed in October 2010 (outlined below).

b) Shutdown of the AGS involved two components: mechanical and electrical. Mechanically, the shutdown required dewatering the shaft to relieve the water pressure so that the connection work between the penstock and the existing pipe could be done. With no water flowing to the turbines, the electrical would also necessarily be shut down. Without electricity, the installation of the disconnect switches in the switchyard and the overall tie-in of the new turbine generator to the existing turbine generators could be done.

c) YEC had the exclusive ability to decide the dates of the shutdown windows. YEC had an interest in minimizing shutdown times, especially in October, for cost reasons. YEC hoped that the October shutdown may be moved to September or eliminated.

d) YEC was concerned about undue delay to the project.

e) YEC recognized that NAC would have to be on site for both shutdown windows.

f) NAC began the contract work in August 2010, well before the Contract was finalized. At the time of the change to the shutdown windows, NAC was in the midst of work that they could not stop.

g) There was a logical sequencing to the work activities. For example, the penstock had to be connected before the concrete floor was poured; the fill had to be added before the concrete floor was poured; and the concrete floor had to be poured before the turbine generator and related equipment could be lowered. If there was a delay in one of these activities, it necessarily caused a delay in the ones that followed. Position of NAC on

Schedule D [ 70 ] Contrary to Patrick Maloney’s statement that compensation to NAC under

Schedule D is for additional costs as a result of the change to the shutdown windows

schedule and consequent extension of the Contract completion date, NAC’s arguments suggest that they only have to show additional costs as a result of the new completion date. [ 71 ] NAC does not identify what time they spent on site beyond June 19, 2011, for reasons other than the change in the shutdown windows. In other words, NAC’s arguments assume that all of their time spent on site after June 19 for which they claim under

Schedule D is not only because of the change in the shutdown windows, but also for other reasons. These other reasons still entitle them to compensation under

Schedule D. NAC is not claiming under

Schedule D for the summer months. [ 72 ] NAC says

Schedule D shows that YEC accepted the extension to the Completion Date caused by the change to the shutdown windows would increase NAC’s costs. NAC notes that the costs claimed do not include the costs of labour and materials as they are provided for under the Contract. [ 73 ] NAC says

Schedule D does not preclude them from being compensated through other mechanisms in the Contract – for example for extra work or delays caused by YEC - occurring during the same time period as NAC claims compensation under

Schedule D. NAC notes that none of these resolved CRX claims referred to

Schedule D. Compensation under

Schedule D is not precluded by NAC’s own delays or poor quality work. YEC’s concerns about NAC’s delay or workmanship may be addressed by claiming against NAC for loss, damage, delay, or failure to complete the Contract on time, all provided for through other sections of the Contract (4.3, 4.2, 8.3, 16.7, 16.8).

Schedule D is meant to prevent YEC from keeping NAC on site for longer (inadvertently or not) at no cost to YEC. In other words, NAC’s

interpretation of

Schedule D is very broad. [ 74 ] NAC alternatively argues that because it largely completed its work on

schedule and the predominant reason it was on site during the

Schedule D claimed period was for the work planned to be done during the shutdowns, it is entitled to compensation under

Schedule D. [ 75 ] In NAC’s alternative argument, they said that non-shutdown activities did not extend their time on site. Even if these activities occurred during the

Schedule D claimed period, they were still compensable because they were consistent with NAC’s ability under the Contract to sequence its work as appropriate, as long as the work was done by the Completion Date. [ 76 ] NAC says that YEC has failed to show that NAC’s alleged failures of workmanship, poor planning and safety record, and lack of proper tools and equipment, caused delays requiring NAC to be on site for longer for reasons not related to the change in shutdown periods. Position of YEC on

Schedule D [ 77 ] YEC says that NAC is claiming under

Schedule D for work done over the same time period for which they have already been compensated under other Contract provisions and this is not the purpose of

Schedule D. NAC has failed to prove that all 102 days on site, for which they claim

Schedule D costs, were a result of the extension of the Contract Completion Date due to the change in shutdown

windows from one to two. [ 78 ] Specifically, YEC says NAC was already compensated, including profit and overhead costs, for extra work and delays caused by YEC under other sections of the Contract during the same time period covered by the

Schedule D claim.

Section 4.5(

d) allowed NAC to request a “fair adjustment” to the price on a “time and materials basis” if YEC changed the work in any way that increased NAC’s costs by more than $1,000. Claims by NAC under s. 4.5 were compensated at force account labour rates, which include overhead and profit, that is, the same costs included in

Schedule D.

Section 4.3 of the Contract allowed NAC to be reimbursed for reasonable costs incurred as a result of delay caused by a breach of the Contract by YEC. [ 79 ] NAC claimed costs under these Contract provisions through the submission of 73 CRX claims amounting to $1.4 million or 20.5% of the Contract Price. NAC calculated it spent a total of 4,279 hours on extra work (s. 4.5). As well NAC claimed damages of over $795,000 for delays caused by YEC (s. 4.3).

Those claims were settled in 2016. [ 80 ] In addition, NAC calculated it spent 2,182 additional hours completing the base Contract work because of the changes to the scope of work and claimed $244,165 in damages (s. 4.5). This claim was also settled in 2016. [ 81 ] Patrick Maloney of NAC admitted that these 6,461 hours (4,279 + 2,182) for which NAC was compensated under other sections of the Contract were unrelated to the

Schedule D claim. He further testified there was no way of identifying how much of the work done during these hours was done during the

Schedule D claimed period. [ 82 ] YEC concluded on review of the CRX claims that just less than approximately one third of the 73 CRX claims were for extra work done during the

Schedule D claimed period. Specifically, 21 CRX compensable claims, amounting to 929 hours, were for work done during September, October and November 2011. [ 83 ] YEC also noted that three significant events, unrelated to the change in shutdown windows, created delay and contributed to NAC working during the

Schedule D claimed period. First, the penstock design delay and significant changes resulted in extra work (s. 4.5 of the Contract - CRX 15) and meant that NAC could not demobilize over the summer as originally planned. Second, the thrust block design changes caused 21 days of compensable delay (by agreement after NAC’s submission of a CRX claim). This delay meant that the penstock work could not be done during the June shutdown, as planned in February. Instead, the penstock work was done from October 1-10, 2011, during the

Schedule D claimed period. Third, the Type 4 concrete fill that had to be placed around the penstock and compacted to create a base for the tunnel floor slab, failed to set properly when it was poured in May (later than the February scheduled date of end of March). As a result, it had to be dug up and replaced with new fill, which occurred in early July. The tunnel floor slab was not completed until July 11, 2011, instead of in April, as planned in the February schedule. The turbine and related equipment could not be lowered until August 1-28, 2011, instead of in April, as planned in February.

Related alignment work could not be started until September and finished in early October 2011, during the

Schedule D claimed period. None of these delays was related to the change in shutdown windows from one to two, or the extension of the Completion Date. [ 84 ] YEC further noted that certain electrical activities, including installation of vibration equipment, termination of the sump pumps and controls, and installation of the AH3 remote UMC panel, were done in late September and early October 2011, because they could not be done until the turbine generator equipment had been lowered into place. Originally, as of the February schedule, these activities were planned for April. [ 85 ] YEC noted other activities were done during the

Schedule D claimed period that were not shutdown activities. They included the installation of the tailrace piping - originally scheduled as of February to be done in April, and in fact not done until between late September and late October 2011; and the installation of the fire system, originally scheduled as of February, to be completed in April, and not started until September 15, 2011. Both of these activities could have been done at any time during the project and were not shutdown activities.

Also, mechanical work occurred between September 30 and November 30, 2011 that had been scheduled to be completed by June. [ 86 ] YEC further argued that NAC lacked proper staffing, tools and equipment, safety processes, and planning skills, all of which contributed to

schedule delays, not related to the change in shutdown windows. It was clear during the June shutdown that NAC did not understand how to install the new switchgear properly, start it up and test it, or synchronize it with existing plant electrical systems. If delays caused by NAC were the reason for NAC remaining on site, compensation under

Schedule D was not possible, as it was only intended to compensate NAC for costs caused by YEC’s change to the schedule. [ 87 ] Even if some of NAC’s costs were legitimately claimed under

Schedule D, the overhead cost calculation is unfairly calculated and constitutes double counting because the Contract Price includes profit and overhead. [ 88 ] YEC noted that Patrick Maloney made the following admissions on cross-examination at trial: “other factors [than the

Schedule D factor] did force us to be there till later”; and “we knew from early on [since the change in penstock design] that we were not going to meet the June 19 Completion Date.” YEC’s

Interpretation of

Schedule D Prevails [ 89 ] I accept YEC’s

interpretation of

Schedule D. It was intended to compensate for actual general conditions costs incurred by NAC, caused by YEC’s changes to the shutdown window

schedule and consequent extension of the Completion Date to November 30, 2011. These costs were not to be claimed if they were otherwise covered by the Contract Price or any other compensation mechanisms in the Contract.

Schedule D must be read with the rest of the Contract, which contains provisions that compensate for extra work and delay for reasons other than as set out in

Schedule D. [ 90 ] The entire

Schedule D clause must be interpreted, including the reference to s. 3.3, which sets out the specific dates of the new shutdown windows, and YEC’s preference to avoid a second penstock dewater in October

Section 3.3 also provides that early completion of the Mayo plant outage may allow for an earlier start/finish to the second shutdown window. The November 30, 2011 Completion Date is clearly connected on the wording of the Contract to the two new shutdown windows.

[ 91 ] Under this

interpretation, any days spent by NAC on site during the claimed

Schedule D period that are not attributable to the change in shutdown

schedule and consequent later Completion Date, cannot be compensated for under

Schedule D. As YEC rightly notes,

Schedule D does not provide for damages, but instead for actual general conditions costs incurred because of extra time spent on site for a specific reason. [ 92 ] NAC emphasizes its satisfaction of the contractual obligations by the new Completion Date and disregards the limiting provision of

Schedule D to activities connected with the shutdown window change. NAC also disregards the double recovery situation resulting from their claims under

Schedule D, as well as their claims for extra work or delays under other CRXs for work done during the same time period. Creating this double recovery situation cannot have been the intent of

Schedule D. [ 93 ]

Schedule D recovery is limited to shutdown window change activities, and to costs incurred that are not compensated elsewhere. NAC Failed to Prove its 102 Days On Site Entitle Them to Compensation per

Schedule D [ 94 ] I accept YEC’s arguments that NAC has failed to prove it is entitled to compensation under

Schedule D for an additional 102 days spent on site. YEC has demonstrated through the evidence at trial, including the cross-examination of Patrick Maloney, that NAC worked through much of the claimed

Schedule D period not because of the change to shutdown windows. [ 95 ] More specifically, I find the following facts:

a) NAC submitted 73 CRX claims for costs as a result of changes to the scope of work by YEC, amounting to $1.4 million or 20.5% of the Contract and an additional 4,279 hours. Out of 73 CRX claims, at least 21 of those, amounting to 929 hours, were for work completed during the

Schedule D claimed period, according to YEC’s assessment. These claims were unrelated to the

Schedule D claim. Compensation for those CRX claims was provided by YEC to NAC at force account labour rates, meaning that overhead and profit were included.

b) NAC claimed $244,165.80 for an additional 2,182 hours that they spent on site because changes to the scope of work took them longer to complete the base Contract work than originally estimated. This damage claim was settled in 2016. The work was unrelated to the

Schedule D claim, and some of the 2,182 hours may have been spent during the

Schedule D claimed period. NAC has not attempted to separate the

Schedule D claimed costs from the costs compensated for the 2,182 hours and as well as the 4,279 hours of extra time spent on site. Patrick Maloney admitted they have no way of doing so. In addition to the 929 hours of work done under CRX claims during the

Schedule D claimed period, identified by YEC, it is likely that some of the other 6,461 hours represented work done during the

Schedule D claimed period.

c) The three significant events occurring after February 1, 2011, contributed to the situation where NAC needed to be on site for longer than originally estimated. The penstock design delay, the thrust block re-design delay, and the Type 4 fill error all resulted in mechanical and electrical work being done during the

Schedule D claimed period as a result of consequential delays in other earlier sequenced activities. This work was not related to the

Schedule D claim.

d) NAC saved certain work that could be done at any time until the

Schedule D claimed period. These non-shutdown activities included tailrace piping installation, the fire system installation, and mechanical work that was planned to be done in June. This work was not related to the

Schedule D claim.

e) The NAC performance issues described by YEC’s Contract Administrator, Robert Simonson, as well as other YEC supervisors and managers, included lack of proper staffing and equipment, tools and planning skills, as well as the absence of effort to maintain the schedule. These likely contributed to some delay in the work. However, it is difficult to assess and calculate the extent to which these delays caused the continued NAC presence on site during the

Schedule D claimed periods. It is more appropriate for YEC to claim under other provisions of the Contract – for example, deficiencies - instead of attempting to reduce the amount of NAC’s compensation under

Schedule D. [ 96 ] Having found these facts, I note that some of NAC’s work could only be done during the second shutdown. This included connecting the final part of the penstock, some of the electrical switchgear and connection work, start-up and commissioning. These activities were planned for the October shutdown when the February

schedule was built, the first

schedule to incorporate the two shutdown periods. [ 97 ] A comparison of the February

schedule with the October 3, 2011

schedule and the November 2011 planning aid shows there were certain activities done before and during the October shutdown which had been planned since February. Those activities, with the February time estimates were:

a) modification to existing controls (6R and 6F) - 5 days;

b) pre-shutdown check out - 15 days;

c) programming supplied controls - 2 days;

d) penstock dewater and rewater - 2 days;

e) generator start-up - 3 days;

f) turbine start-up - 3 days;

g) TIV Valve start-up - 2 days;

h) HPU start-up - 3 days;

i) TIV Accumulator skid start-up - 1 day;

j) LPU Unit start-up - 5 days;

k) commissioning support of generator/turbine - 1 day;

l) generator station start-up - 1 day; and

m) modification and addition to vibration system - 3 days. [ 98 ] Many of the time estimates in the October 3, 2011

schedule for these activities were much longer. The November 2011 planning aid also showed longer periods of time to do this work. The reasons for this are not clear from the evidence. It is also unclear whether there was overlap in some of these activities. I have made calculations on the basis of the estimates made in the February

schedule and assumed there was no overlap in the days identified for the activities. [ 99 ] The pre-shutdown activities (15 days) were done from mid-September 2011 to early October 2011. NAC had to be on site anyway during that time in order to do the work as described above in paras. 82 and 83 that had been planned much earlier. These 15 days are not compensable under

Schedule D. [ 100 ] The time estimated in the February

schedule for the shutdown activities amounts to approximately 30 days of extra time that NAC would remain on site as a result of the two shutdowns. The nature of these activities, which are clearly shutdown activities; the original plan, as of February, for NAC to do this work during the October shutdown; and the acceptance by YEC that some additional costs would be incurred by NAC as a result of the second shutdown, all support compensation to NAC under

Schedule D. [ 101 ] The overlaps in the

Schedule D claimed period noted by YEC for the CRX activities, the non-shutdown activities, and the activities that were delayed for reasons other than the shutdown window

schedule change are difficult to calculate with accuracy. In argument, the parties referred to the time spent on these activities by hours, not days. There was no evidence on the number of hours that would constitute a day in this context, with multiple workers doing multiple activities. NAC’s claim under

Schedule D is calculated by days, not hours. [ 102 ] It is clear from the evidence that NAC spent far fewer than 102 days on site doing work only required by the change to shutdown windows. The best evidence for NAC’s compensation under

Schedule D is the actual work done that had originally been planned for the October shutdown once that shutdown was scheduled. NAC failed to prove on a balance of probabilities that it was required to be on site for a full 102 days under

Schedule D. It did not identify the work it did during the

Schedule D claimed period that was caused by the change in shutdown windows. It did not respond specifically to the arguments raised by YEC, supported by evidence from the schedules and affidavits, that much more work was done during those periods that was not related to the change in shutdown windows. Quantum of

Schedule D Claim [ 103 ] NAC claims an average daily cost of $6,210.89 for project logistics costs and project specific overhead costs. [ 104 ] Project logistics costs consisted of:

a) camp operators, who did the cooking, cleaning and grocery runs for the personnel who worked on site;

b) on-site equipment rental including NAC owned equipment and rental from Driving Force;

c) off-site equipment rental for three trucks for the managers/supervisors;

d) fuel and maintenance for the vehicles;

e) insurance – for liability and commercial general liability (CGL); and

f) bonding expense. [ 105 ] Project specific overhead costs consisted of:

a) management salaries over the relevant time period, with Patrick Maloney’s reduced to 50% because he was working on a mining project in Ontario;

b) meals;

c) management travel;

d) pension plan contributions and group health benefits percentages; and

e) head office overhead. [ 106 ] YEC disputes:

a) the head office overhead costs;

b) the 50% of salary claimed by Patrick Maloney from September to November 2011; and

c) the 7.5% vacation pay amount for employees.

[ 107 ] NAC’s claim for overhead costs is based on its support team at its corporate head office in Ontario. NAC calculated the overhead amount based on the Hudson Formula, adopted by the Court in Bianchi Grading Ltd. v. University of Guelph (2006), 61 C.L.R. (3d) 199 (O.N.S.C.) . NAC used 7% of the contract value as the head office overhead percentage. NAC chose 7% because it is the lower end of the 7% - 10% fluctuation range of overhead costs, and the range amount NAC uses for bidding purposes. [ 108 ] YEC disputes the applicability of this amount for a number of reasons:

a) The Hudson Formula does not represent actual costs, which is what

Schedule D in this case compensates for. The Hudson Formula is calculated by multiplying the original contract price divided by the original contract period, by the head office overhead percentage under the original contract, and then multiplying this figure by the period of delay (I.N. Duncan Wallace, Q.C., Hudson’s Building and Engineering Contracts , 11 th ed. (London, England: Sweet & Maxwell, 1995) at 1076). This formula does not produce actual costs.

Schedule D of the Contract allows for compensation for actual costs.

b) NAC has not provided any evidence that it included 7% overhead in the Contract Price. In fact, NAC provided no evidence other than Patrick Maloney’s affidavit assertion that its 7% claimed for overhead costs is reasonable. Other courts have dismissed claims for overhead costs where there is insufficient evidence in support, such as revenue, expenses and lost opportunity [see Dirm Inc. v. Dalton Ltd. (2006), 67 C.L.R. (3d) 59 (O.N.S.C.) ].

c) The Hudson Formula inflates overhead costs by using in its calculation the total contract price which already includes overhead and profit. Overhead and profit should be deducted from the full contract amount before the overhead percentage is applied. [ 109 ] I agree with YEC that the overhead costs of 7% claimed by NAC are not substantiated or justified. There is “no detailed examination of the individual items of claimed overhead increase” (Duncan Wallace – pp. 1080-81).

This claim is not permitted. [ 110 ] YEC disputes the 50% claim for Patrick Maloney’s salary because he was working as construction manager on a mine site in Ontario beginning in August 2011, and did not keep track of his hours. He became involved at the YEC project only when Laith Hamad, who had become the commissioning and close-out manager, escalated the matter to him. [ 111 ] During this period there is evidence that Patrick Maloney built the August 2011 schedule, was included in emails about various aspects of the project, and was required to give approvals.

He was still involved in the management of the project, although not on a day- to-day basis as he had been. [ 112 ] Although the evidence from NAC is thin to support the claim for 50% of Patrick Maloney’s salary, given the absence of any other proposed calculation and noting that there is evidence of his continued involvement in the project, this claim is allowed. [ 113 ] YEC disputes the 7.5% of the staff salary claim that NAC says is paid out as vacation pay for the employees. YEC says there is no evidence from NAC that vacation pay was paid out to any of these employees. I agree and this claim is disallowed.

Conclusion on

Schedule D [ 114 ] To conclude, NAC is entitled to 30 days of extra time under

Schedule D as claimed, based on the $6,210.89/day, less overhead costs of 7%, less the 7.5% vacation pay, plus management travel of $5,630.72 during the first two weeks of October. This amounts to $164,940.02. II. CRX 100 Issue [ 115 ] This is a claim by NAC for $119,004.95 representing costs of 860 hours of labour incurred to procure and install electrical cables that were not shown on YEC’s Issued for Construction (IFC) drawings. These cables were installed during the start-up and commissioning phase of the project. The work included new cable runs, new cable support assembly, and new connections. The claim is made pursuant to the scope of work or change of work

section of the Contract – s. 4.5. [ 116 ] NAC claims the work on CRX 100 was performed between May 2011 and the end of the project and does not include additional cable procurement. The NAC claim includes:

a) the costs to terminate the cables added in February 2011;

b) the costs of changes created by the May 16 Cable

Schedule Package; and

c) the costs of further changes requested by YEC after May 16, 2011 and in particular during the October shutdown. [ 117 ] YEC objects to this claim for four reasons:

a) NAC is inconsistent about the scope of the claim;

b) NAC’s evidence to substantiate the claim is unreliable;

c) the changes described and claimed by NAC appear to duplicate other CRX claims for which NAC was compensated through a settlement agreement in 2016; and

d) there is no actual evidence of the hours NAC spent doing the work. [ 118 ]

Section 4.5 of the Contract states:

(

d) if a Change to the Work … increases or decreases the cost to the Contractor by more than $1,000, the Parties will agree in writing upon a fair adjustment to the Price on a time and materials basis as per

Schedule B: … [ 119 ]

Schedule B sets out the force account labour rates based on NAC’s calculation of an hourly rate for that employee level, plus NAC’s overhead, including travel costs, camp allowance, and profit.

Schedule B provides a 10% mark-up on any subcontracted work. Brief Conclusion [ 120 ] I find that NAC has not clearly articulated or substantiated its claim under CRX 100. While there is some evidence of changes that were made during the October shutdown at the instruction of YEC, the identification of those changes, the work they entailed, and whether that work was compensated for by other CRX claims is not clear. The time NAC spent on any such changes is not properly isolated or calculated.

Not only has NAC not proved on a balance of probabilities its costs for the changes referred to in CRX 100, but YEC has demonstrated through its evidence the high likelihood that nowhere close to 860 hours were spent by NAC on changes deserving of independent compensation. This claim is dismissed.

Background [ 121 ] This project required the installation of multiple electrical devices including 3,000 different pieces of instrumentation equipment, 300 control panels, two high voltage generators, four high voltage transformers, distribution panels, different motors and motor control centres, switchgear and other accessories. It also included approximately 30,000 metres of cable. The cables included larger high-voltage power cables and smaller control and interconnection cables. [ 122 ] YEC contracted with AECOM to provide IFC cable

schedule drawings to NAC and YEC. These included drawings of the positions of the buildings, tunnels and equipment on site. The drawings were necessary to determine the types, lengths and routes for the cables for procurement purposes. Revisions were done after NAC requested further information in December 2010. Clarification was still required and a meeting between AECOM and NAC was held in January 2011, to discuss the cable schedules. On February 1, 2011, AECOM issued a revised cable list, called Revision B Cable Schedules.

NAC ordered cables based on that list, which required additional cables from the original contract work. Further changes to the list were made subsequently. [ 123 ] In April 2011, YEC and NAC agreed that the Revision B Cable Schedules and subsequent changes were a change to the work from the original scope of work in the contract. NAC was required to purchase additional cables and provide increased labour to run the cables between the relevant pieces of equipment.

YEC agreed to pay NAC $46,000 for the additional costs of this change to the work (CRX 24). [ 124 ] There is a dispute between the parties about whether CRX 24 included the cost of additional terminations resulting from the additional cables. Termination means doing the necessary steps to complete the connection of the cables, including stripping the end of the conductor so it can be connected, identifying the cable, labelling its function, and attaching it to the end point on the equipment through a breaker or a block.

This work was done during the October shutdown. [ 125 ] NAC says that the compensation under CRX 24 did not include the costs of the new terminations required, but only the cost of additional material and running the cable between relevant equipment. NAC says they were unable to quantify the complete number of terminations required. YEC disagrees, through Operations Manager Edward Peake, who testified that he would not have approved a CRX 24 settlement unless it included all of NAC’s costs arising from the change of work. He recalls no discussion about CRX 24 excluding the terminations.

YEC notes there is no note in the minutes from the April 2011 meeting where CRX 24 was resolved, indicating terminations were excluded from CRX 24. The Revision B Cable Schedules allowed NAC to estimate the maximum number of terminations required, which NAC could have compared to their original cost estimate, and included any additional costs in CRX 24. [ 126 ] In mid-April 2011, NAC, Orbis Engineering Field Services Ltd. (“Orbis”), YEC, AECOM and CAP Engineering (YEC’s consultant) met about the design of the control system for the new turbine/generator.

Orbis had been hired by NAC in mid-March 2011, to program the control and protection system. Orbis was also hired by YEC to prepare the input/output

schedule (“I/O Schedule”). The I/O

Schedule shows the specific termination or interconnection details, including a listing of the commencement and termination of each cable related to the new equipment that was required to be installed by NAC. It was based on the IFC drawings. [ 127 ] On or about May 16, 2011, YEC provided to NAC a detailed wiring design package (“May 16 Cable

Schedule Package”), identifying the quantity, type and location of cables to be supplied and installed by NAC. This cable

schedule was based on the Revision B Cable Schedules. It re-assigned some of the cable connections identified in the Revision B Cable Schedules; identified the cables that had been included in the Revision B Cable Schedules that would not be required in the final design; identified the additional cables and changes to the Revision B Cable Schedules in a consolidated list; and included termination sheets that identified the cable connections and terminations among the equipment and electrical systems. YEC also included in the May 16 Cable

Schedule Package the I/O

Schedule prepared by Orbis. This document was produced by YEC and identified as Tab 347 of the common book of documents at the first trial of this matter. [ 128 ] In addition to the May 16 Cable

Schedule Package, YEC provided NAC a clean updated cable list, showing the changes to the Revision B Cable Schedules in the May 16 Cable

Schedule Package, as well as electrical schematics and logic diagrams. These combined documents incorporated all the changes required up to May 16, 2011. [ 129 ] Laith Hamad, an electrical engineer, and the Electrical Operations Manager and later the Commissioning and Close-out Manager for NAC, said the first ten days of the October shutdown were spent doing wiring work or installing equipment at YEC’s request that was not planned.

NAC said they kept track of these changes through marking up a copy of a termination sheet, also called a cable list extract, in each room showing which cables needed to be pulled and the terminations required. The changes were identified by Laith Hamad using the termination sheets/cable list extracts and the May 16 Cable

Schedule Package and comparing them to the I/O list. NAC said they kept count of the changes by looking at the number of terminals added, the number of extra cables they had to pull, and the

number of conductors that were changed from one location to another after installation. The termination sheets/cable list extracts used to identify these changes were not produced, although Laith Hamad said he had them “at the time”. The actual changes made were not listed or itemized, either in the actual CRX 100, or in the affidavit evidence of Laith Hamad. [ 130 ] The labour costs of these changes were estimated by NAC, as they did not track the actual time spent. In fact, on cross- examination, Laith Hamad testified there was no way to distinguish or isolate the costs of the changes that make up CRX 100.

The estimate was based on the time for the activities set out in the NECA book, an estimating standard tool used in the industry, multiplied by the NAC labour rate. Laith Hamad estimated 600-700 hours based on his understanding of the activities performed. The estimate was also based on a “high level breakdown of hours for work done on changes during the October shutdown period at the request and direction of Yukon Energy”, stated by Laith Hamad in his Affidavit #1, September 20, 2019.

That “high level breakdown” was set out in an email attachment to Laith Hamad’s Affidavit #1, from the Electrical Supervisor, Martin Hurrell. His email set out a total of 70 hours, plus 80% of two other workers’ hours, the total of which was not included. Two additional pieces of work were identified as outstanding, without any estimate of hours.

Martin Hurrell begins his email with “[w]ell I am out of hours now.” [ 131 ] Laith Hamad concluded in his affidavit “we often had three electricians performing these changes all day for about 20 days before, during and after the October shutdown”, as a further justification for the 600 hours claimed. There is no other evidence to support this statement. [ 132 ] YEC agreed there were changes because of errors in the original design; existing equipment was not as expected; extra functions on new or existing equipment. However, YEC says NAC’s claim is not substantiated.

Analysis of CRX 100 Scope of NAC’s Claim not Clearly Articulated [ 133 ] In its third amended statement of claim, dated September 13, 2019, NAC claims for costs incurred to procure and install electrical cables not shown on YEC’s IFC drawings, and required to be added during the start-up and commission phase of the project. [ 134 ] The actual scope of the claim is unclear because of the absence of reliable evidence from NAC about the changes made during the October shutdown. The lack of clarity stems from inconsistencies in the articulation of the baseline to which the changes are compared.

NAC has provided the following options of baselines for the changes made during the October shutdown:

a) the differences between the May 16 Cable

Schedule Package and the Revision B Cable Schedules (Laith Hamad);

b) the May 16 Cable

Schedule Package (Laith Hamad);

c) the I/O

Schedule prepared by Orbis (Laith Hamad);

d) the Revision B Cable Schedules (Patrick Maloney Affidavit #1); and

e) the terminations resulting from the Revision B Cable Schedules, not captured by the compensation provided by CRX 24 (Laith Hamad). [ 135 ] NAC also claims generally for changes YEC instructed them to make during the October shutdown. NAC does not provide a baseline document for these changes in the affidavit material. It does refer in its third amended statement of claim to the start-up and commissioning document prepared by NAC with significant input from YEC and finalized as Revision 6 on September 29, 2011. It is an agreed fact that this was the final version of the commissioning plan.

Any changes requested by YEC during the October shutdown must logically be changes from the Revision 6 document. NAC does not articulate specific changes from the Revision 6 document, dated September 29, 2011 to the October shutdown. [ 136 ] These inconsistencies in NAC’s articulation of the scope of its claim, stemming from an absence of clear evidence in support of the changes, affect the assessment of NAC’s reliability related to this claim.

NAC’s Claim for Costs of Electrical Changes Unsubstantiated [ 137 ] NAC was unclear and inconsistent in its evidence of the material it used, as well as who prepared it and when, to identify the changes made during the shutdown. The changes claimed included changes to the new control and protection panels (6F and 6R), the new switch gear, the existing control and protection panels and the HPU and governor. [ 138 ] Laith Hamad testified that from the time the parties agreed on the updated cable list and I/O

Schedule until the end of the project, any additional cables and terminations, or moving a cable on YEC’s directions that had been landed in accordance with the I/O Schedule, constituted a change or addition to NAC’s work. [ 139 ] At various times, NAC gave the following additional explanations of how they identified the changes:

a) Laith Hamad compared the document at Tab 347 (May 16 Cable

Schedule Package including the I/O

Schedule from Orbis) and the termination sheets (unclear whether these were the termination sheets provided by YEC in May 2011, or the ones NAC said they created during the shutdown) to the I/O

Schedule created by Orbis and provided to NAC by YEC in May 2011 (Laith Hamad Affidavit #1 of September 20, 2019). It is unclear how comparing the Tab 347 document, which included the I/O Schedule, to the I/O

Schedule could identify any changes.

b) NAC generated a final cable list on site during the October shutdown from the manually marked-up termination sheets at every panel. It was compared to earlier drawings to identify the changes (Laith Hamad on discovery in 2015). This list was never produced.

c) Tab 347 was NAC’s as-built cable list and the changes referred to in CRX 100 were identified by comparing the Tab 347

document to the May 16 Cable

Schedule Package provided by YEC. However, YEC has demonstrated through unchallenged evidence that Tab 347 was the same document as the May 16 Cable

Schedule Package. It was created and produced by YEC and not by NAC, as testified by Edward Peake and Michael Tilbrook, and by Laith Hamad at the first trial.

d) NAC pleaded in its second amended pleading before the second trial that it created an as-built cable list which it used to identify the changes from earlier documents. YEC brought an unsuccessful application to have this pleading struck based on the previous unchallenged evidence about Tab 347 and no further evidence produced by NAC. After the application, NAC amended its pleading on September 13, 2019, and removed the claim that it created an as-built list (NAC second amended pleading, June 2019).

e) Tab 347 was the final cable list received from YEC on May 16, 2011, confirming all the changes made to that date. In his affidavit and on cross-examination Laith Hamad testified that the Tab 347 document is effectively the as-built Electrical Major Power Cable

Schedule (Laith Hamad Affidavit #1, September 20, 2019).

f) A final cable list was generated in the field by YEC and AECOM in October-November 2011, during the start-up and commissioning period. The changes for which compensation was sought through CRX 100 are derived from comparing this list to the February 2011 list (not the May 16 Cable

Schedule Package). Tab 347 is not referenced in this explanation (Patrick Maloney Affidavit #1, September 20, 2019). [ 140 ] It is clear on all of the evidence that there was no as-built cable list. The closest document to one was the May 16 Cable

Schedule Package, prepared by YEC and Orbis, not NAC. All agree there were changes between the issuance of that document and the completion of the project. [ 141 ] NAC’s changing evidence on whether or not there was a final cable list, whether or not it was an as-built cable list, who prepared it, and when it was prepared is troubling, especially since it is an essential document to support their proof of the CRX 100 claim.

In the end it is clear that NAC did not prepare the document. [ 142 ] Further, NAC’s failure to produce the marked-up termination sheets is a significant gap in NAC’s evidence, as these sheets appear to have been used to identify changes claimed. [ 143 ] The ongoing apparent confusion within NAC from 2015 to the second trial about the existence of the final cable list and its author, combined with their failure to produce the termination/cable list extract sheets prepared by NAC, results in an absence of reliable evidence in support of NAC’s claim under CRX 100.

CRX 100 Duplicates Other Resolved CRX Claims [ 144 ] Another reason to deny NAC’s CRX 100 claim is the duplication of recovery. There is persuasive evidence that costs claimed under CRX 100 were covered by other resolved CRX claims. NAC and YEC agree that NAC prepared and submitted CRX claims 79, 80, 85, 86 and 100 at the same time, in early January 2012.

Laith Hamad was unable to say on discovery the time period over which the work compensated for in CRX 79, 80, 85 and 86 was done. [ 145 ] NAC argues that the other CRX cost recoveries were for programming changes made by Orbis, the costs of which were charged to NAC. When a wire was changed as a result of YEC’s changes, Orbis implemented the programming and updated the I/O Schedule. Orbis did not make the physical changes to the cables or terminations.

The changes NAC is claiming under CRX 100 are for changes caused by YEC instructions and directions before, during and after the October shutdown, separate from those costs caused by the Orbis changes to the I/O Schedule. [ 146 ] Further, in most of the other CRX claims referenced by YEC, there is a note from NAC stating “additional cables not included”. NAC says this note shows the intention of compensation for work on additional cables be done separately. [ 147 ] A description of the other CRX claims, evidence of their overlap with CRX 100 and NAC’s responses are:

a) CRX 79 - $41,600 to NAC for costs of completing wiring and termination changes on the new switchgear equipment, per YEC mark-ups. Orbis programming work in the amount of $20,233 was included in the recovery under CRX 79. The remainder of the claim, $21,367, is attributable to NAC labour costs for 160 hours. NAC could not say whether these hours were from time sheets or an estimate. NAC says these CRX 79 changes were different than the changes to the switchgear protection circuits set out in Tab 347, which were captured in CRX 100. There is no evidence other than this assertion.

b) CRX 80 - $33,000 to NAC for costs of completing electrical work on existing electrical control and protection panels, specifically conducting synchronization termination changes and additions not in NAC’s scope of supply. The CRX 80 changes were based on schematic marked-up drawings YEC provided to NAC. Part of the Orbis invoice was allocated to this CRX. The claim for the Orbis work was in addition to 100 hours of NAC labour. NAC could not say if these hours were from time sheets or an estimate. NAC asserted that these changes were different than those changes set out in Tab 347, and also noted the amounts attributable to Orbis.

c) CRX 82 - $16,500 for costs of installing a new panel enclosure and components of a communications panel and to terminate fibre optic and communication cables. NAC did not respond to this.

d) CRX 85 - $11,400 for costs of completing the electrical modifications required to the L&S governor. The governor controls the speed of the generator by communicating with the HPU which activates the TIV and the wicket gates that control the amount of water flowing to the turbine. The accumulator is the back-up system that allows the TIV to close in an emergency stop situation. The programmable logic control (“PLC”), designed and implemented by Orbis, is used to control how and when the governor directs the

HPU and accumulator. When the PLC was not ready at the time of shutdown, temporary modifications were required to ensure the HPU and accumulator could be activated and the TIV closed until the PLC was ready. CRX 85 was compensation for these temporary modifications. An invoice from Orbis was part of this compensation. NAC claimed for 70 hours of labour. NAC could not say if these hours were from time sheets or an estimate. NAC says these changes are not reflected in the termination sheets in Tab 347 and are not part of CRX 100. NAC noted the payment for Orbis programming changes, which were not part of CRX 100.

e) CRX 86 - $52,000 for costs incurred in completing electrical modifications to the Unit Control Module (“UCM”) panel as well as the new control protection panels (6F and 6R) supplied by REV Engineering. These new panels were not supplied as specified by the contract. YEC instructed NAC to add devices into 6R and 6F. The payment to Orbis was $19,000. The balance of $33,000 represented 260 hours of NAC labour. NAC could not say whether these hours were from time sheets or an estimate. NAC says these costs included Orbis programming changes, which were not part of CRX 100.

f) CRX 94 - Unknown amount for cost of installing an additional junction box and pulling and termination of the spare cables. NAC did not respond to this.

g) CRX 96 - $1,600 for costs to add switches and items to the accumulator panel. NAC did not respond to this.

h) CRX 98 - $6,500 for costs associated with installation of the electrical system of the fanwall equipment. NAC did not respond to this. [ 148 ] NAC’s primary argument that the other CRX recoveries were primarily to cover the costs of Orbis and not NAC labour, is not borne out by the evidence. While Orbis programming costs were included as part of the CRX recoveries, NAC labour costs incurred were also reimbursed, and were the larger portion of the reimbursement. [ 149 ]

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