Foundation Company of Canada Ltd v. United Grain Growers Ltd

Date of Release: October 30, 1995

NO. C902032

VANCOUVER REGISTRY

IN THE SUPREME COURT OF BRITISH COLUMBIA

BETWEEN:

AND:

THE FOUNDATION COMPANY OF CANADA LTD.

PLAINTIFF/DEFENDANT

BY COUNTERCLAIM

UNITED GRAIN GROWERS LIMITED

DEFENDANT/PLAINTIFF

BY COUNTERCLAIM

AND:

CHOUKALOS WOODBURN MCKENZIE MARANDA LTD.

DEFENDANT

BUHLER (CANADA) INC. and

CROSSTOWN METAL INDUSTRIES LTD.

THIRD PARTIES

NO. C911710

VANCOUVER REGISTRY

IN THE SUPREME COURT OF BRITISH COLUMBIA

BETWEEN:

CROSSTOWN INDUSTRIES LTD.

PLAINTIFF

AND:

FOUNDATION COMPANY OF CANADA LTD.

DEFENDANT

UNITED GRAIN GROWERS LIMITED AND CHOUKALOS WOODBURN

MCKENZIE MARANDA LTD

THIRD PARTIES

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John S. Logan

Counsel for Foundation:

Charles F. Willms,

Katherine A. Arnold

Counsel for United Grain Growers:

Murray A. Clemens Q.C.,

Henning W. Wiebach,

Rupert M. Shore

Counsel for Choukalos:

Counsel for Crosstown:

Place and Date of Hearing:

Kerry A. Short,

Karen L. Martin

Stuart B. Hankinson,

James R. White

Vancouver, B.C.

Sept. 7, 1993 -

February 4, 1995

132 trial days.

REASONS FOR JUDGMENT

OF

THE HONOURABLE MR. JUSTICE BRENNER

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I N D E X

PAGE

5

INTRODUCTION

NATURE OF THE CLAIMS

NATURE OF THE EVIDENCE

THE GRAIN TERMINAL

THE PROJECT

9

13

17

20

21

23

24

25

39

40

61

PERSONNEL

CHRONOLOGY

HISTORY OF THE TENDER

THE TENDER PERIOD

THE PRIME CONTRACT

PRESELECTED EQUIPMENT - DELIVERY RESPONSIBILITY

PROJECT DELAY - FCC ALLEGATIONS

PROJECT DELAY - CMI ALLEGATIONS

117

PROJECT DELAY - UGG AND CWMM ALLEGATIONS

CONCLUSION ON PROJECT DELAY CAUSATION

FCC NEGLIGENT MISREPRESENTATION CLAIM

FCC BREACH OF CONTRACT CLAIM

141

159

163

173

177

EXTENSION OF CONTRACT TIME

NOTICE OF CLAIM BY FCC, CMI AND UGG

FCC DAMAGES - DELAY

179

213

217

FCC EXTRAS

CMI ACCELERATION CLAIM

CMI PRODUCTIVITY LOSS CLAIM

263

276

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CMI EXTRAS

292

DEFICIENCY PROGRAM

330

331

CMI OVERHEAD AND PROFIT

INTEREST

332

334

JUDGMENT SUMMARY

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INTRODUCTION

1.

These actions follow a major renovation in 1989 at the

United Grain Growers Limited ("UGG") grain terminal on the

Vancouver inner harbour (the "Terminal"). Foundation Company of

Canada Ltd. ("FCC") was the General Contractor, UGG was the Owner

and CWMM including its subconsultant P. J. Campbell & Associates

Ltd ("CWMM") was the engineer retained by UGG. No cross claims

are advanced between UGG and CWMM. Although UGG's position at

trial was that its vicarious responsibility for any acts or

omissions of CWMM is limited to the discharge by CWMM of its

duties under the prime contract, UGG does not assert any extra-

contractual conduct by CWMM and hence UGG is vicariously

responsible for any acts or omissions of its engineer CWMM.

2.

Crosstown Metal Industries Ltd. ("CMI") was the sheetmetal

subcontractor of FCC responsible for the fabrication and

installation of dust control ducting and spouting. Spouting is

made by joining rectangular sections of sheetmetal together in

runs which convey grain by gravity flow down through the various

levels, equipment and storage bins in the grain terminal. Gates,

which act as valves, are installed in spouting runs and are

opened and closed to control the flow of grain.

3.

On February 10, 1989 UGG accepted FCC's tender and awarded

it the $16 million stipulated price contract. FCC awarded the

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spouting subcontract of $2.86 million to CMI on February 14 (all

dates in 1989 unless otherwise noted). On site construction was

scheduled to start March 6 when UGG shut down its operations at

the Terminal, and continue until Substantial Performance by

August 31. In the result, CWMM certified Substantial Performance

as of December 29. To be determined is the responsibility and

recoverable damages, if any, arising from that delay, as well as

the entitlement of FCC and CMI to extras.

4.

CMI says it was prevented from installing its spouting as

planned because of delays in site preparation and in the delivery

and installation of equipment to which it was required to connect

spouting runs. CMI also says when it tried to install its

spouting, interferences with other components in the terminal, or

the terminal itself caused by CWMM design errors required CMI to

modify the spouting so it would fit. CMI seeks damages for

productivity losses, acceleration costs and unpaid extras in the

amount of $1,746,601 plus contractual interest of $1,152,620

calculated to the date of argument in February 1995. While CMI

advances its claims through FCC in contract, most of its

allegations are referable to the acts or omissions of UGG and

CWMM, for which FCC claims indemnity.

5.

FCC advances against UGG either directly or through CWMM

allegations for breach of contract and negligent

misrepresentation as well as alternative claims in quantum meruit

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or for restitution. FCC says these contractual breaches or

negligent misrepresentations consisted of:

(i) the late design completion and delivery of as well

as defects in owner pre-selected equipment;

(ii) the late completion of a new

administration building being

constructed for UGG by another

contractor;

(iii)the fact that the design of the Project

was not complete at the time of tender

and changed after the close of tender;

(iv) the inability of FCC to obtain access to

UGG's dock to install two dock

progressors;

(v) the significant number of Change Orders

added to FCC's contract; and

(vi) the delay in the computer programming by

CWMM.

6.

FCC's claim in this action also includes such of the unpaid

Change Orders or extras claimed by CMI found to be Change Orders

under the Prime Contract, together with its 5% markup. It seeks

judgment against UGG and CWMM for $2,236,002 including interest,

as well as indemnity in respect of the CMI claim. FCC advances

no claims for acceleration, overtime costs or productivity

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losses. It says its damages are its costs in having to continue

on the job site past the original substantial performance date of

August 31 to the actual date declared by CWMM of December 29.

7.

UGG and CWMM say that FCC and CMI have failed to prove:

(1) that any of the events of which they complain either

individually or collectively caused any delay to FCC or CMI

in prosecution of their work on the project or on their

ability to achieve substantial performance by August 31;

(2) that any of the alleged causes of delay were the fault of

UGG or CWMM;

(3) that FCC and/or CMI gave sufficient notice of delay or

request for extension of time under the contract.

8.

The defendants say that FCC and CMI failed to complete the

contract on time because of their own inexperience or

incompetence and they are solely responsible for any losses which

flow from the manner in which the work was carried out or the

late completion. They point to delay caused by FCC's demolition

contractor Johnny Walker, gates supplied for FCC by IECO, the low

levels of manpower utilised by FCC and CMI in the early stages of

the project, CMI's decision to fabricate complete spouting runs

from CWMM construction drawings without prior shop drawing

approval and without first field measuring which they say was

required by the contracts to ensure that the runs would fit

without interferences and CMI's decision to use 2 piece instead

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of 4 piece spouting which is less rigid and more amenable to

adjustment during installation.

9.

UGG counterclaims against FCC for its economic losses of

some $5 million caused by the contractor's 4 month delay in

achieving substantial performance, for which FCC seeks indemnity

from CMI.

10.

At the opening of the trial, the quantification of the

counterclaim and the third party proceedings against CMI were

severed. CWMM's third party claim against one of the equipment

manufacturers Buhler (Canada) Ltd. was discontinued with costs

reserved. Both the FCC and CMI actions were heard together.

11.

To be decided is:

1.

Liability and damages in CMI's action against FCC

including the liability of UGG and CWMM to contribute

to or indemnify FCC for any damages which may be

awarded to CMI;

2.

3.

Liability and damages in FCC's action against UGG and

CWMM;

Liability in UGG's counterclaim against FCC.

NATURE OF THE CLAIMS

12.

In this case FCC alleges it suffered damages because the

acts or omissions of CWMM or UGG prevented it, despite all of its

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efforts in mitigation, to achieve substantial performance under

the contract by August 31. No analysis was done by either

plaintiff in an attempt to quantify each delay period said to

have been caused by each respective act or omission alleged

against the defendants. That is to say no ordinary or expert

evidence was tendered linking a specific defendant error to a

quantified delay period.

13.

Rather the plaintiffs rely on the evidence in the documents

created at the time together with the testimony of witnesses to

show the causal link between the defendants' failings and the

project delay. They assert that if I conclude that the

plaintiffs' original plans of work were achievable, and if I also

conclude that no act or omission of the plaintiffs caused any

delay, then I must conclude that the late completion was caused

by the failings of the defendants which did not allow FCC and CMI

an "unimpeded run at the work".

14.

CMI emphasizes what it says was CWMM's failure to address

the following problems that it says hampered its work on this

project:

(a) The late release of necessary design data;

(b) The late delivery of equipment which was to be

installed by others;

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(c) "Interferences", where the spouting could not be

constructed as dimensioned by CWMM because it would

have conflicted with other spouting, or equipment, or

the building itself; and

(d) Changes in the scope of CMI's work.

15.

16.

In CMI's case, this can be assessed only by reviewing how

CMI intended to execute its work, by reviewing the reasonableness

of its bid, and reviewing each claim to determine why the claim

arose and how much it cost CMI.

CWMM contends that many aspects of this project did not

proceed as and when originally anticipated by various parties

during the tender period. The witnesses with experience in

retrofit industrial projects testified that unanticipated

problems frequently occur in this type of project. However, in

CWMM's submission, the two critical issues in both actions are:

what were the effective causes of the delay in the completion of

the project, and where does legal responsibility lie for those

causes of delay?

17.

I concur with that submission and conclude that as a

starting point I must answer the following questions regarding

the plaintiffs' allegations against the defendants:

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1.

2.

Were any one or more of the alleged acts or omissions

of UGG or CWMM an effective cause of the delay to the

progress of the work?

If the answer is yes, was that work on the critical

path such that that delay caused loss or damage in the

forms asserted by FCC and CMI?

3.

4.

If the answer to 1 & 2 is yes, were there any

concurrent delays not caused by the defendants?

If there were any such concurrent delays, is that a

complete defence to the plaintiffs' delay claims or is

it appropriate to apportion fault amongst the parties?

18.

The defendants say the plaintiffs claims for damages for

late completion fail for want of proof. They contend that while I

heard a long litany of complaints during the trial about the

matters said to have delayed the plaintiffs in their work, there

is little or no evidence showing that these complaints were,

either individually or taken together, the effective cause of the

plaintiffs failing to complete the work by August 31. In CWMM's

words, "these complaints can be properly summarized as one

'cause' after another without 'effect'". It says there has been

a complete failure to establish on a balance of probabilities

that any of the alleged breaches, or acts of negligence or

misrepresentations of CWMM caused a delay, or loss to FCC or

CMI."

- 13 -

19.

In my view these questions can only be answered by an

analysis of the evidence to determine whether any of the

defendant's acts or omissions alleged by the plaintiffs were in

fact the effective cause of delay or loss to FCC or CMI as they

contend. I propose to conduct this review chronologically in the

context of the specific factual allegations and to make

appropriate findings of fact. In doing so I shall be considering

whether I am able on the evidence to conclude what the effective

cause or causes of delay were on this project. If I conclude I

am able to do that, I shall then consider liability for those

effective causes under the specific heads advanced by FCC and

CMI. This will necessarily include an analysis of the terms of

the contract and subcontract to see if the requisite notice was

given as well as other provisions said by the defendants to

constitute a complete or partial defence to the plaintiffs'

claims. If I conclude that the plaintiffs can succeed, I shall

assess the recoverable damages for the delay. I shall then turn

to a consideration of the more specific claims of CMI for

acceleration, overtime, lost productivity and for the extras

claimed by both FCC and CMI.

NATURE OF THE EVIDENCE

20.

Because of the nature of the claims, much of the trial

testimony consisted of the employees of the parties reviewing

events on the project chronologically. Much of the documentary

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evidence consisted of notes made at the time by many of the

participants.

21.

FCC kept minutes at the weekly site meetings which started

February 21. The meetings were attended by all parties as well

as other subcontractors. The minutes were typed after the

meeting and circulated to all attendees prior to the start of the

next week's meeting. The site minutes contained standard

language inviting recipients to advise if they took issue with

the accuracy of the minutes. On at least one occasion CMI did so

and the minutes were revised.

22.

The defence witnesses testified that these minutes were not

objective and tended to reflect the interests of FCC. However

they lodged no formal objection at the time. Since these minutes

were kept by the employees of FCC they do have the potential to

be self serving and selective in the details they record.

However, because of the absence of any written objections from

the defendants at the time to the content of the minutes, I

consider the minutes to be a generally accurate record of the

proceedings at those meetings, subject to the general proviso

that they were maintained by FCC and hence have the potential to

reflect its interests. These minutes can be accorded

considerable weight when the events recorded can be corroborated

by notes made at the time by one or more of an adverse party's

employees.

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23.

24.

Van Dyke of UGG was probably the most prolific note-taker

and his practice was to record during the meetings both what was

said at meetings and who said it. He afterwards added to his

notes what he recalled saying at the meetings.

Other contemporaneous records were kept in the form of

internal reports generated by the parties for their own use such

as the Daily Site Reports prepared each day by Don Steel, FCC's

site superintendent from February 28 until he left the project

August 24 and the daily reports kept by CWMM.

25.

Generally there was considerable consistency between the

notes kept by the parties, particularly in the earlier part of

the project and before the course of the job strained relations

between the parties. Where notes about a contentious issue from

witnesses for both sides are generally consistent, I have not

hesitated to accept them as accurate, and to be preferred to the

trial testimony of witnesses who were trying to recall what

occurred at meetings or what their notes meant after the passage

of some five years.

26.

Another feature of this trial was the relative absence of

expert evidence. I heard from only two expert witnesses: John

Dawson-Edwards who testified in support of the CMI productivity

loss claim and Gordon Adams who gave brief expert evidence for

CWMM on the procedures followed by spouting contractors. These

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took a total of five days of trial time. The balance of the 127

days of trial evidence came from ordinary witnesses as to what

occurred on the project.

27.

The defendants take issue with the failure of FCC and CMI to

call evidence to show how the alleged acts or omissions of the

defendants caused the plaintiffs to be delayed in the prosecution

of their work. CWMM says the plaintiffs should have led evidence

in the form of expert time and motion analyses to show the

precise nature and extent of the delays alleged. It relies on

Pacific Coast Construction Co. Ltd. et al v Greater Vancouver

Regional Hospital District et al (1986) 23 C.L.R. 35 in which

Wallace J said at p. 55:

To reach any proper conclusion as to the costs from the

delay one would be required to analyze the contractor's

progress and to determine to what extent the different

causative factors, such as contractor caused delays,

unavoidable delays and owner-caused delay contributed

to the overall delay experienced by the contractor. It

would also be necessary to evaluate the validity of the

contractor's original contract schedule and the

"reasonable contractor" schedule.

28.

What Wallace J says is: (1) that a plaintiff contractor in

a delay claim must establish a causal link between an owner

caused event and resultant contractor delay; and (2) a plaintiff

contractor must establish that its original contract schedule was

reasonable, i.e.--that it did not underbid by artificially

compressing its time estimate to get the contract. However I do

not take Wallace J's decision on the summary judgment application

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in Pacific Coast to mean that a plaintiff contractor is obliged

to lead expert evidence in support of these requirements.

29.

While such evidence might make the task of a trial judge

easier, I am of the view that the evidence of the people who

actually did the job can be the more compelling. In addition, it

is not realistic to expect parties to a construction project to

start keeping detailed records for the purpose of litigation from

the outset of the project. The evidence to which I accord the

greatest weight is that brought about prior to the development of

conflict on the job and before the parties started creating a

record in anticipation of the subsequent litigation. I am not

convinced that receiving the opinions of experts who engage in

post facto analysis is necessarily more helpful than hearing the

evidence of the people who worked on the job each day and who are

able, particularly with the assistance of their notes made at the

time, to explain what was happening.

30.

Of course, the party with the legal burden of proof is still

obliged to make out its case. A failure to do so must result in

a dismissal of the claim. Even if the party discharges its

burden of proof and establishes liability, the quality of that

proof may make it difficult or impossible for the court to award

the full measure of damages sought. The consequence of that is

that damages will be awarded in an amount that can be supported

by the evidence that has been adduced, rather than the damages

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that might have been recovered had evidence in appropriate detail

been maintained by the parties and available to the court.

THE TERMINAL

31.

UGG receives grain into the Terminal by railcar and cleans,

stores, and ultimately loads it onto ships for delivery to its

customers through an east and a west berth at a dock owned by the

Vancouver Port Corporation and leased to UGG. The Terminal was

originally constructed in 1923 and has undergone numerous

renovations and additions. It has a multi-level section in the

middle called the workhouse, attached to which are annexes

running to the north and south containing bins in which grain is

stored. Also attached to the west side of the workhouse is the

track shed into which arriving railcars containing grain are

moved and the contents of the cars emptied into hoppers.

32.

Moving down from the top floor, the workhouse contains a

garner floor, scale floor, distributing floor, bin floor,

cleaning floor and basement. Conveyors extend horizontally out

from the bin floor of the workhouse the length of the annexes so

grain can be moved into the storage bins. Similarly, there are

conveyors running along the bottom of the bins in the annexes

used to transfer grain out of the bins.

33.

After each arriving car load of grain is dumped and weighed,

it moves to the top floor of the workhouse through a vertical

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receiving leg and into garners on the garner floor for drying.

The grain then moves down through scales on the scale floor,

through the distribution and bin floors to the cleaning floor in

the workhouse. At this point the grain is cleaned with small

seeds, wild oats and broken wheat being separated and directed

into by-products storage. The clean grain is then again moved

vertically through the clean grain leg to the top floor, after

which it passes down through a garner and onto conveyors on the

bin floor for distribution to the assigned bin in the north or

south annex for storage.

34.

When required for shipment the grain is drawn down from the

bin onto the basement conveyors and moved to the shipping leg.

It again travels vertically up the shipping leg to the top floor,

after which it passes through another garner and scale located on

the garner and scale floors respectively. It then moves down

into a shipping bin from which it travels out to the dock via

shipping conveyors and is loaded onto a waiting ship. Within the

terminal, the grain is moved upwards using conveyors called

"legs", horizontally with conveyors and downwards through the

spouting.

35.

Spouting must be designed, manufactured and installed with

care. Because the grain depends on gravity and because the object

is to move the greatest volume of grain at the highest possible

speed and because the direction of spouting runs frequently

- 20 -

changes in order to avoid other spouting or structures, it is

important to minimize sharp changes in direction along the length

of a spouting run. Such changes cause increased abrasive wear on

the inside of the spout where the running grain contacts the

inside of the spout and they can cause grain to accumulate and

jam the spout. Diamond or twist fittings are used in spouting

runs where directional changes are required. These are used to

ensure that maximum grain flow can be maintained through the

directional changes in the spouting runs. Where the running

grain contacts the inside of the spouting runs, steel plate

liners are used to absorb the wear. Liners are periodically

inspected and replaced as they are worn by the grain flow.

THE PROJECT

36.

This project was intended to increase the terminal's

capacity to clean grain so UGG could process its share of the

West Coast grain allocation. To achieve this, two major changes

were involved: first, new machinery, spouting, dust collection

and electrical equipment was installed in almost all areas of the

Terminal, except for the Oilseed Plant and Barley System upgraded

earlier, and second, a new computer system was installed which

was intended to put all of the new machinery in the Terminal

under a new centralized automatic control from a new

Administration Building.

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37.

While this project was underway, the Vancouver Port

Corporation ("VPC") dock leased to UGG was being upgraded with

UGG's concurrence under a separate contract between VPC and JJM

Construction. While FCC played no part in the dock upgrade, it

was required to install two progressors on the dock. These

progressors shunt railcars in and out of the track shed where

grain is unloaded. JJM was a non-union contractor which caused

conflict with the union forces of FCC.

38.

Also while the project was underway, UGG contracted with PCL

Construction Ltd for a new administration building. FCC had to

complete tie-ins for grain sampling and install a new centralized

automatic control in the new administration building. FCC says

delays by PCL in constructing the building delayed its work. It

also says substantial performance under the contract was

impossible until the automatic control was operational.

PERSONNEL

CMI

Randy Popowich - CMI project co-ordinator and CMI principal

(referred to as "Popowich")

Howard Popowich - CMI site general foreman (referred to as

"H. Popowich")

Gary Todd - CMI Burnaby shop foreman

Hank Rupert - CMI detailer on site

Tom Adams - CMI "A" foreman

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Mark Hiatt - CMI "B" foreman

John Dawson-Edwards - CMI expert witness re: CMI

productivity losses

FCC

Ted Skodje - Senior Vice-President Western Canada

John Derhousen - Estimator, mechanical portion of FCC tender

Ray Marquis - project manager

Don Steel - site superintendent to August 24, 1989

Brent Hawkins - site engineer

John Whitaker - project engineer, prepared FCC schedules

throughout project - was not available to testify at trial,

but was examined for discovery. In this judgment references

to his evidence are references to discovery evidence read in

at trial.

Johnny Walker - FCC's demolition subcontractor

UGG

Gerry Moore - General Manager, executive vice-president and

COO of UGG

Murdoch McKay - Manager of Western Canada Terminal

Operations

Clarence Van Dyke - project and systems manager - UGG site

representative during the project

Wayne Pope - Manager of Vancouver Terminal Operations

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CWMM

Bill Choukalos - President

Bob Rhodes - CWMM site representative from March 13, 1989

until April 1990 when he joined UGG

George Somogyi - mechanical/design engineer

Gary Van Druten - draftsman/technician/designer

Herb Hoffman - site representative

Don Foote - quantity surveyor

P.J. CAMPBELL & ASSOCIATES LTD.(CWMM sub-consultant)

John Campbell - project engineer

David Atwell - mechanical engineer, site supervisor

BUHLER (CANADA) LTD

Erwin Notter - manager, materials handling

HAMMOND ASSOCIATES

Mark Hammond - electrical engineer, subconsultant to CWMM

VANCOUVER PORT CORPORATION

Peter Smith

CHRONOLOGY

December 18, 1988 - initial closing date for tenders

- 24 -

January 13/89

-

CMI bids $3,208,876 for spouting and

dust collection to all general

contractors

January 17

February 10

-

FCC bids $16,484,737 for project

UGG issues Letter of Intent awarding

contract to FCC

February 14

March 6

-

FCC issues Letter of Intent to CMI - CMI

bid reduced to $2,864,228

Project commencement, grain terminal

shutdown

-

March 29

May 16

-

prime contract signed

CMI - FCC subcontract signed

Planned CMI work completion

Revised Substantial Performance date

CMI advances claim of $1,478,175.00 to

FCC

August 11

August 31

November 10

November 21

-

FCC submits CMI's November 10 claim,

together with its own claim for

compensation, to UGG with a copy to

CWMM.

December 29/89 -

CWMM

awards FCC

Substantia

l

completion

on project

- 25 -

HISTORY OF THE TENDER

39.

In May 1987, CWMM prepared a Preliminary Report for Terminal

No. 3 Improvements which contemplated a phased construction

program allowing Terminal improvements to be done without

shutting the Terminal down. An alternative to phased

construction was to shut the Terminal down for the 40 week

estimated construction period. The Report also noted an

estimated Project cost of $9.5 million, which was later updated

in May of 1988 to $10.6 million. This estimate did not include

any changes in the bin floor conveyors.

40.

At the time UGG was considering upgrading the Terminal it

was also discussing with VPC the problems it was having with the

dock. In 1987 a vessel damaged the west berth of the UGG dock

and put the west berth out of commission for two months. UGG

continued to ship using the east berth during this period. In

October of 1987 CWMM, on behalf of UGG, made the first formal

application to VPC to install two dock progressors. Choukalos

described these progressors as "an integral part of the terminal

improvements". The progressors shunt rail cars out onto the dock

and then into the track shed for unloading.

41.

Subsequently, a number of improvements mentioned in the

Preliminary Report were done by others including an upgrade of

the Barley System by Spantek.

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42.

In September 1988 UGG decided to add the bin floor conveyor

upgrade to the scope of the work and to build the new

administration building. The minutes of a special design review

meeting of September 28, 1988 note that CWMM had prepared

preliminary layouts for the bin floor conveyors, and that "this

administration building is a critical delivery item - must be far

enough along in construction completion to accept new electrical

and control room functions".

43.

At this time UGG decided that these three significant

changes to its operation in Vancouver, the Terminal improvements,

the new Administration Building and the dock upgrade, would best

be carried out while the Terminal was shut down.

THE TENDER PERIOD

(a) THE TENDER

44.

On November 17, 1988 tender documents were sent to the pre-

qualified contractors including FCC. The Instructions to Bidders

included the following provisions:

Section 1 - INSTRUCTIONS TO BIDDERS

1.

SCOPE OF WORK

1.1 GENERAL

1.1.1

Furnish all labour, equipment,

supervision, tools and miscellaneous

materials to complete the mechanical,

electrical and structural work including

track work to the full intent of the

drawings and specifications.

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The scope of this work includes the

supply of all equipment, including pre-

selected equipment appendixed. U.G.G.

has prepaid some of the referenced

suppliers of pre-selected equipment.

The details of prepayments are listed

and will be accounted for on the Tender

Form.

Test all mechanical and electrical

equipment in accordance with the

specification....

1.1.3

The work shall include but not be

limited to the following areas:

a)

b)

c)

d)

e)

f)

Trackwork and Receiving

Primary Wheat Cleaning

Distribution

Bucket Elevator Upgrades

Primary Wheat Reclaim

Bin Floor Conveyors and Scale 3

Spouting

Miscellaneous work in North Annex

New Panel Room and offices,

equipment rooms in Administration

Building....

g)

h)

1.5 Purchase and Installation of Pre-selected

Equipment

1.5.1

The Owner has pre-tendered and selected

equipment to be used for this project

and has issued Letters of Intent to the

successful tenderers. Copies of the

Letters of Intent are appendixed.

1.5.2

The Contractor shall issue a purchase

order to the manufacturers of the pre-

selected equipment for the prices and

conditions detailed in the Letters of

Intent. The Contractor shall arrange

for delivery, receive, store, install

and warranty the pre-selected equipment.

1.5.3

The cleaning equipment has been

purchased fully assembled. If the

Contractor finds that he must dismantle

and reassemble the equipment for

installation, he shall arrange with the

manufacturer for whatever is required to

maintain the manufacturer's warranty.

- 28 -

The Contractor shall include in his bid

the costs of any dismantling and re-

assembly.

1.5.4

The bucket elevators will come in

components for site assembly including

the buckets which must be bolted to the

belts. Pulleys will be mounted on

shafts along with bearings and low speed

coupling half. If required to

disassemble the pulley assemblies for

installation it will be the Contractors

responsibility to reassemble. Drive

base will be shipped complete with all

drive components as shown....

12. SCHEDULING OF WORK

12.1 Speed and sequence of construction is of the

essence. Plant shutdown is scheduled to begin

March 6, 1989. The plant must be fully

commissioned and handed over to UGG on or before

July 31, 1989...

45.

46.

On November 28, 1988 the tender date was extended to January

6 and on December 21, 1988 it was further extended to January 17.

The Terminal shutdown date of March 6 remained unchanged.

On November 23, 1988 Campbell faxed Van Dyke requesting

advice of "all equipment that you want to keep - reference

demolition and removal", and noting "we would like to advise

contractors this info in Monday's addendum". UGG did not respond

until after the contract was awarded. FCC subcontracted the

demolition work to Johnny Walker and UGG afterwards decided to

keep certain equipment that both FCC and Walker assumed would be

his. He billed FCC for this equipment, which FCC in turn claims

from UGG.

- 29 -

(b) CMI'S WORK PLAN

47.

In the weeks leading up to the tender, CMI developed its

plan for the project. It contemplated fabrication at its shop in

Burnaby and its related companies in Calgary and Spruce Grove,

Alberta. CMI advised tendering contractors of its plan by

letters of December 5, 1988 and January 4. The "work outline"

enclosed with the January 4 letter described CMI's plan for the

mobilization, prefabrication of product, installation, and

availability of steel. The December 5, 1988 proposal explained

that:

"Fabrication would begin as soon as an approval could

be received on any drawing submissions. We would

utilize all three company facilities to increase

fabrication output."

"All shops would then ship their fabricated product to one

coating facility ... in the Lower Mainland... This area

would also act as our marshalling yard. Inspection of any

product or coating application could be made the consultants

or owner at this location."

"When an area becomes available, the preparation of the

fabrication drawings and pre-fabricating of products ...

will allow us the flexibility required to complete the many

different areas with short notice."

"Manpower will not be a problem at this company, we

presently have an active waiting list of key site personnel

for engagement."

48.

Popowich described the plan for preparing and submitting

shop drawings, having those shop drawings returned with the

designer's comments, and the production process thereafter. When

prepared, the shop drawings were to be submitted through FCC to

CWMM who would review the drawings and return them, generally

- 30 -

either marked "review completed", "make corrections as noted", or

"resubmit". This process of submissions and the review process

actually started on March 8.

49.

50.

Following CWMM review, the shop drawing and computer disk of

the drawing were to be reviewed by Fagrie to determine whether

any special fittings required manual detailing. If so, he would

prepare custom drawings.

The next step in the process was the preparation of cutting

sheets. These sheets were a translation of the three dimensional

spouting details on the shop drawings into two dimensional shapes

to be cut from steel plate. This information was stored on

floppy disks. When the shop foreman was ready to cut the steel

shapes, he would download the cutting information from the floppy

disk to the computerized cutting table. The sheet steel was then

laid on the cutting table and the shapes cut by the computer

guided cutting torch. Once the steel was cut, drilling or

punching holes for bolted connections, or folding the sheet to

form the final shape of the spout would occur. The final step of

the fabrication stage was the attachment of angle brackets,

welding joints, attaching liners and assembly of lids. The

assembled spout would then be ready for painting and shipping to

site.

- 31 -

51.

CMI's plan was contingent on an adequate supply of sheet

metal workers in Vancouver for the field installation. While

there was an adequate supply in the spring when CMI planned to

start field installation, the delays in the project meant that

when CMI went to ramp up its field forces in the summer of 1989,

it found a shortage of labour.

(c) CMI'S PLANNED SEQUENCE OF CONSTRUCTION

52.

CMI's January 4 letter to the invited general contractors

included some preliminary schedule information. The bin floor

conveyer spouting was the first element CMI planned to finish, by

June 15. The balance of the spouting was planned to be complete

by July 15.

53.

FCC's February 20 "tender schedule" (actually prepared after

the award had been received) shows the installation of dust

control ducting in March, gates during the last week of March and

spouting beginning April 3. It also indicates equipment

deliveries of such equipment as drag conveyors, primary wheat

cleaners and wheat reclaim equipment, to which CMI was obliged to

connect its spouting runs.

54.

After receiving FCC's tender schedule, CMI faxed its

detailed spouting and dust control schedule to FCC on March 27.

CMI planned to start work in the primary wheat cleaning area:

installation of feed pots and hoppers was to have begun

- 32 -

immediately, with spouting to follow in a logical sequence. The

spouting for the north annex was to be installed through the

month of April and south annex spouting was to be installed

beginning late in April and completing in early July. Other

areas of the work were similarly detailed as to CMI's intended

sequence of construction.

55.

The intended sequence of construction in this case was of

considerable significance. Many of the areas into which spouting

had to be installed were extremely congested and hence it was of

critical importance that CMI be able to proceed with its field

installation sequence as planned.

(e) THE ACCURACY OF THE CMI ESTIMATE

56.

On January 13, CMI submitted its tender to all bidding

general contractors, offering to perform the spouting and dust

collection work for $3,208,876. The takeoff of material

quantities for the estimate was prepared by David Harrish, the

senior industrial estimator for CMI's Spruce Grove affiliate.

Popowich then prepared CMI's bid price on the basis of CMI's

experience and on trade information authored by American sheet

metal expert Victor

Ottaviano. Popowich's analysis of the productivity factors were

based on Mr. Ottaviano's suggested labour factors for "black

iron".

- 33 -

57.

58.

59.

On January 16 Popowich wrote to Marquis advising of a

deduction of $125,000.00 from the original total lump sum amount.

Although this was ostensibly because FCC was going to provide

overhead cranage, the defendants say that CMI had carried only

$22,000 in its original bid for this item. In addition CMI

reduced its gate installation price to $22,000. The defendants

say that by so doing CMI effectively underbid this job.

Popowich testified that although he suggested at the time

that the $125,000.00 related to cranage, in fact the only cranage

that CMI had in its bid was $22,000.00, which was eventually

carried into its final tender price to FCC. In my view CMI's

reduction of its tender to $3,083,876.00 was a reasonable

response to Popowich's increased familiarity with the project and

its requirements.

As a precondition to its lost productivity claim, CMI must

establish the reasonableness of its estimate. A comparison of

CMI's original estimate with the bids of its competitors Bisco

and Irvco is instructive. After adjusting for differences in the

scope of work tendered, Bisco's tendered price was approximately

1% lower than CMI's price. Irvco's price was approximately 6%

higher. This narrow differential suggests that either all of the

bidding spouting subcontractors formulated unrealistic plans for

the work, or, as is more likely, CMI's plan was realistically

planned and priced. I find the latter to be more probable.

- 34 -

60.

Further support for the CMI bid and the consequent

reasonableness of its plan of work can be found in a comparison

between its take-off and CWMM's earlier June 1988 take-off.

Since the CWMM take-offs were done prior to any addenda, the

comparison is to the original CMI take-off figures.

CWMM

TAKE-OFF

CMI

TAKE-OFF

%

DIFFERENCE

Reclaim

27,223 lb.

27,336 lb

(Exh. 13,

doc. 3556)

(Exh. 119, p2)

<1%

3.5%

6%

Wheat Cleaning

Distribution

99,924 lb

(Exh. 120,p2)

96,429 lb

(Exh. 13,

doc. 3583)

99,848 lb

(Exh. 121,p2)

93,546 lb

(Exh. 13,

doc. 3583)

61.

It is significant that CWMM's estimated unit cost for all

areas was identical at $4.50/lb. From a further comparison of

unit prices, it can be seen that CWMM added a 7% "mark-up" before

bringing the costs forward to its summary sheet of January 16.

The total calculated in that summary was then increased by

approximately 16% for escalation and other factors. Applying this

to the $4.50 unit cost gives an adjusted unit price of $5.60/lb.

62.

This figure is almost identical to CMI's overall tendered

unit price for spouting. CMI's January 24 "final sheet" and the 7

back-up sheets to it show the following figures:

- 35 -

$1,632,333 estimated spouting costs from p.1-5;

411,112 lb. estimated spouting weight from p.1-5;

$359,918 mobilization costs: approximately 18% of other

costs

20% profit

63.

64.

CMI's unit price derived from these figures is $5.62/lb.

Based on the foregoing, I conclude that CMI's bid for the work

was reasonable.

(f) FIELD MEASUREMENT

CMI's plan which it communicated to FCC and CWMM before

FCC's tender was accepted February 10, showed significant pre-

fabrication of spouting. That is the spouting was to be

fabricated in sections and the liners installed prior to delivery

to the site. CMI's intention was to pre-fabricate runs of

spouting off-site based on CWMM's construction drawings leaving

the last or at least one section of spouting in the run to be

measured on site and custom finished at the time of installation

when the all of the spouting segments in each run were joined

together. CMI says inaccuracies in the drawings caused it to

encounter interferences when it went to install the spouting

runs. This in turn generated much extra work in fabricating

replacement fittings to accommodate these interferences.

65.

The defendants say CMI was obliged under the contract to

"field measure" or use a fabrication procedure to ensure that the

- 36 -

spouting could be installed without interferences. I deal with

the responsibility for field measurement in the "Project Delay"

section of the judgment.

(g) PRE-SELECTED EQUIPMENT

66.

On or about January 9, Addendum number 4 added the rest of

the Letters of Intent to the preselected (or, as referred to by

FCC "pre-purchased") equipment suppliers. By this date the

tender documents included Letters of Intent of various dates

issued to 12 equipment suppliers by CWMM. The equipment

suppliers were companies who were to supply specific equipment

selected by and fabricated to CWMM's specifications for

installation in the Terminal. The 12 equipment suppliers were

selected by CWMM on UGG's behalf prior to the close of tenders on

February 10 by which date UGG had made payments to Buhler, Carter

Day, Motion Control, Ebco, Western Scale and Transcontinental

Engineered Products. The letters of intent had a projected

delivery date to the site of mid-March. Van Dyke testified as to

UGG's intention:

Well the plan of UGG was that we have all the equipment

that took a long time to manufacture be made and be

ready prior to when the contractor was going to need

it.

67.

To achieve this, it is clear from the evidence of Van Dyke

and Campbell that UGG and CWMM intended that all of the equipment

be designed and manufactured so as to be available to be

delivered to the Terminal in or about March 1989 at the latest.

- 37 -

68.

I conclude that prior to the close of tenders on February

10, FCC and CMI understood the owner's intention and both

contractors believed that all of the preselected equipment would

be available so it could be delivered to the Terminal in or about

mid-March. FCC and CMI were entitled to rely and did in fact

rely on the accuracy of the tender documents, including the

Letters of Intent to the equipment suppliers. As Campbell said in

discovery, "when a delivery date is set out in a letter of intent

in a tender package as a matter of practice in the construction

industry it is assumed by the tendering contractor that the date

has been agreed to by the recipient of the letter". I find that

FCC and CMI relied on the dates shown in the letters of intent in

formulating their bids and planning their work on the project and

that such reliance was reasonable and justified.

69.

A common provision in the Letters of Intent also required

the equipment suppliers to submit certified or "shop" drawings to

CWMM within 10 or sometimes 14 days of the Letter of Intent. The

shop drawings which passed back and forth between CWMM and the

equipment suppliers were significant since generally an equipment

manufacturer waits for a fully reviewed shop drawing from the

engineer before completing fabrication of the equipment.

Cardinal Construction v. Corporation of the City of Brockville

(1984), 4 C.L.R. 149 (Ont. H.Ct.), states the effect of tender

documents at p. 170:

- 38 -

...Given the general principle that a bidder is

entitled and expected to rely on the tender documents

as conveying the best information the engineer can

give, it is not good enough in my opinion to provide

information that is misleading incomplete or inaccurate

with the intention that the more experienced or

knowledgeable bidder will ferret out the problems from

"clues". The information should be clear and

intelligible to all bidders and in this case it was

not.

70.

CWMM omitted material information concerning the equipment

from the tender documents. In the months prior to the issuance

of the tender documents, CWMM and UGG received quotes from the

various proposed equipment suppliers. These quotations, except

for the quote from Klockner-Moeller, were neither included in the

tender documents nor disclosed to any of the tendering

contractors. This became a significant omission because many of

the equipment suppliers never agreed to deliver equipment by mid-

March as set out in the letters of intent. Had at least the

quotations from these suppliers been communicated to bidders such

as FCC and CMI, they would have realized prior to tendering that

much of the equipment was not going to be delivered by mid-March

as shown in the letters of intent. Instead only the letters of

intent were included in the Tender package and in my view, they

were inaccurate representations to tendering contractors of

agreements between UGG and the equipment suppliers to manufacture

and supply the equipment in accordance with the Letters of Intent

both as to dates for supply of shop drawings and delivery.

- 39 -

71.

On or about January 16 Campbell did his own tender estimate

to compare with the tenders as they came in. He noted that with

respect to the scope of the Project, the addition of the bin

floor drag conveyors being supplied by Buhler had increased the

scope of the Project by approximately 30%. After the Buhler

conveyors were delivered, FCC had to install and align them and

then CMI had to connect gates and spouting. Accordingly the

timely delivery of this equipment became an essential ingredient

of the ability of FCC and CMI to complete their work as

originally scheduled.

72.

On January 17 FCC submitted its tender in the amount of

$16,484,737.00. Following discussions between January 17 and

February 9 and an exchange of correspondence and credits for

further payments, the tender price was reduced to $15,959,072.00.

One significant change was a $135,000.00 credit given by FCC to

UGG to extend the completion date from July 31 to August 31,

1989.

73.

By January 23 Popowich had reworked his estimate to assist

him in negotiations with the tendering contractors for the

spouting subcontract. He changed CMI's bid from being based on

field installation of 12 hour day shifts, 4 on, 4 off, to a 5 day

shift. Popowich says the 5 day shifts were based on 7-1/2 hour

days. The other parties contend that CMI's revised estimate was

based on 9 hour days. Popowich was extensively cross-examined on

- 40 -

this point and I accept his evidence that with the one month

extension of the contract completion to August 31 his final

estimate of $2,883,876.00 was based on 7-1/2 hour days. This

price, subject to a number of additions and deletions, eventually

formed the basis for the Subcontract price between FCC and CMI.

74.

75.

On January 31 Campbell sent a fax to Van Dyke with a copy

of the CMI pre-qualification which outlined CMI's intention to

prefabricate a large part of the spouting.

On February 8 Marquis advised Popowich that as of that date

FCC was estimating installation of the distributors for May 8 -

May 22, the primary wheat cleaners for April 17 - April 24, and

the drag conveyors April 17 - May 7.

76.

On February 10 UGG accepted FCC's tender and awarded the

Project to FCC. Subsequently minor amendments were agreed to

between FCC and UGG respecting, inter alia, charge out rates for

extra work.

THE PRIME CONTRACT

77.

The prime contract was dated March 29, 1989 and provided,

inter alia, that FCC would:

"(c) commence the Work by the 10th day of February

1989 and attain Substantial Performance of

the Work, as certified by the Consultant, by

the 31st day of August 1989."

- 41 -

78.

It provided in General Condition ("GC") 1 that:

"Substantial performance of the work is as defined in

the lien legislation applicable to the Place of the

Work. If such legislation is not in force or does not

contain such definition, Substantial Performance of the

Work shall have been reached when the Work is ready for

or is being used for the purpose intended and is so

certified by the Consultant."

79.

80.

81.

82.

Supplementary General Condition ("SGC") 13 added the

following:

"Substantial performance is further defined, with

respect to conveyors, only when product flow has been

achieved and to design or maximum capacity."

Specification 15A.4.6 provided:

15A.4.6

Commissioning

Equipment commissioning is not defined

complete until product has run through

the system at design or maximum load.

This was a lump sum contract with a requirement for

substantial performance as defined.

PRESELECTED EQUIPMENT DELIVERY DELAY - RESPONSIBILITY

(a) Introduction

Much of the preselected equipment was delivered later than

the mid-March date set out in the letters of intent. However

under the terms of the prime contract, UGG purported to transfer

the responsibility for the equipment, including its timely

delivery, to FCC.

- 42 -

83.

This was custom equipment being fabricated to the

specifications of CWMM. The manufacturers were required to

submit shop drawings to CWMM for its approval prior to

fabrication. CWMM issued letters of intent to 12 suppliers,

copies of which were included in the tender documents. The basic

format of the Letters of Intent was similar. Each letter began:

"On behalf of United Grain Growers (U.G.G.) we confirm

that U.G.G. intends to purchase, through their

contractor,..."

(emphasis added)

84.

The purchase price in the Letters of Intent were "FOB UGG

Vancouver, B.C.".

The Letters of Intent said:

"The contractor, upon being appointed by UGG, will be

required:

-

to purchase this equipment in accordance with

your quotation and this Letter of Intent.

to assume the year warranty on this

equipment.

-

to arrange with you for delivery.

to receive the equipment.

to store and to install the equipment".

(emphasis added)

85.

Certainly prior to February 10, the letters of intent were

individual contracts between UGG and the respective equipment

suppliers for the supply of equipment insofar as they committed

UGG to pay for the equipment whether or not the Project proceeded

and, if the Project did proceed, irrespective of who the general

contractor would be. In respect of half of the equipment

- 43 -

suppliers, payments were made by UGG directly to the supplier

prior to the award of the Prime Contract to FCC on February 10.

86.

CWMM and UGG say that the intent of the "Instructions to

Bidders" was that the general contractor, upon award of the

construction contract, was to assume direct contractual

responsibility for the pre-selected equipment. They point to the

instructions which provided:

1.5 Purchase and Installation of Pre-Selected

Equipment

1.5.1

the Owner has pre-tendered and

selected equipment to be used for this

project and has issued Letters of Intent to

the successful tenderers. Copies of the

Letters of Intent are appendixed.

1.5.2 the Contractor shall issue purchase

orders to the manufacturers of the pre-

selected equipment for the prices and

conditions detailed in the Letters of Intent.

The Contractor shall arrange for delivery,

receive, store and install and warranty the

pre-selected equipment." (emphasis added)

87.

Did CWMM and UGG succeed in shifting responsibility as they

contend? To answer this question the letters of intent, the

Prime Contract and the conduct of the parties during the course

of the Project must be considered.

(b) THE LETTERS OF INTENT

88.

Each Letter confirmed "that UGG intends to purchase, through

their contractor..." certain equipment. "Through" means "by the

agency of". (See Black's Law Dictionary, 6th Edition, Definition

- 44 -

of "through"; Rye and Eyre v. Inland Revenue Commissioners,

[1935] A.C. 274, at pp. 278-279 (H.L.)). That language creates

at least the prospect that in respect of the purchase of the

equipment, FCC was acting not as a principal but as UGG's agent.

As Hammond testified with respect to Klockner Moeller, the

Letter of Intent "tells Klockner Moeller that basically no matter

what UGG will pay Klockner Moeller for the motor control

centres".

89.

The letters of intent were representations or guarantees to

the suppliers that ultimately UGG would ensure they were paid for

the equipment. If UGG had decided not to proceed with the

project, they were nonetheless guaranteeing payment.

(c) THE LANGUAGE OF THE CONTRACT

90.

The obligation of FCC is set out in 1.5.2 in the

Instructions to Bidders quoted above. Although this requires the

contractor to issue its own purchase order, nowhere in that

section does it provide that the contractor shall purchase the

equipment and resell it to UGG. In fact, Instruction to Bidder,

1.5.3 says:

"the cleaning equipment has been purchased fully

assembled".

(emphasis added)

- 45 -

91.

The contractor was also obliged to issue a purchase order

"for the prices and conditions in the letters of intent". The

contractor had no right to vary any of those terms previously

committed by UGG. In addition, the instructions did not impose

an obligation on the contractor to ensure or guarantee "timely"

delivery. Alternatively, the instructions contained no language

which would have alerted a contractor or put it on notice that

the proposed delivery dates in the letters of intent issued by

UGG were not to be relied upon or were to be verified by the

contractor prior to tender.

92.

This provision did not require FCC to step into CWMM's shoes

after February 10 with respect to the continuing design or

fabrication of the equipment. There was no intention that FCC

take over any of the design or fabrication responsibility for the

equipment. That always remained with CWMM. FCC was only

obligated to "arrange delivery" under the contract.

93.

Clearly, had the design and fabrication of the pre-selected

equipment occurred on what was doubtless the originally intended

timeline so that it would have been available for delivery by

mid-March, the task of finalizing the design and indeed much of

the fabrication would have been completed when the contract was

awarded to FCC on February 10. However because this did not

occur, it is difficult to see how FCC can be fixed with the

responsibility for the fact that the equipment was late-

- 46 -

delivered. In my view, had the parties intended to fix FCC with

this obligation, clearer contractual language ought to have been

used. That language ought to have included at least a warning

that bidding contractors were not to rely on the mid-March dates

in the letters of intent and were to conduct their own

independent investigations prior to tender.

94.

I conclude that the obligation to issue a purchase

order for "the prices and conditions detailed in the Letters of

Intent" when considered in conjunction with the language of each

Letter of Intent and Instruction to Bidder 1.5.3 indicates that

the intention of the contract was that the purchaser of the

preselected equipment was at all times to be UGG, and in respect

of that purchase FCC was acting as UGG's agent in issuing the

purchase orders. This is consistent with the fact that the

equipment was selected, designed and manufactured to the approval

of CWMM and UGG.

95.

In addition, FCC did not, at any time, have any property in

the equipment. The delivery of the equipment was FOB site. The

method of delivery and the risk in the property was completely

with the equipment supplier until delivery to site. After

delivery, the equipment became the property of UGG. The FCC

warranty only commenced after substantial performance was

achieved. UGG says that the payment of a markup to FCC on the

equipment purchased meant that FCC purchased the equipment as

principal and resold it to UGG and that FCC was thereby

- 47 -

responsible for the late delivery. I do not agree with that

submission. FCC was to warranty the equipment after substantial

performance and the markup was likely the appropriate

consideration for FCC's agreeing to assume that responsibility.

96.

UGG also says that FCC signed the formal contract on March

28 with full knowledge that most of the equipment would be

delivered later than mid-March. While this is true this

submission misinterprets the legal effect of the letter of intent

awarding the contract to FCC on February 10. The parties entered

into a binding contract February 10 when FCC's bid was formally

accepted by UGG. This is supported by Campbell who testified that

the effect of a letter of intent in this context is that a

binding contract is entered into upon issuance. It is clear that

all of the parties acted on the basis of letters of intent and

not the formal contracts. While FCC learned shortly after

February 10 that there would be some delivery delays, it also

believed that it could still achieve substantial performance by

August 31 by utilizing the float time built into its schedule.

97.

CWMM continued to be responsible for the completion of the

design of the equipment and the approval of submitted shop

drawings after February 10. In my view, it would not be a

consistent interpretation of the contract documents to conclude

that FCC, which had no input into this continuing design process,

- 48 -

was nonetheless responsible for the timely delivery of equipment

when it had no control over the design or fabrication.

(d) COURSE OF CONDUCT - PRESELECTED EQUIPMENT

98.

Alternatively, if the terms of the Prime Contract relating

to the pre-purchase equipment are ambiguous, reference can be

made to parol evidence to determine the intention of the parties.

Throughout the course of the Project, FCC took the position that

its only obligation with respect to the preselected equipment

suppliers was to arrange for delivery and install the equipment

once it reached the site. FCC made it clear that it had no

responsibility for the design or manufacture of the equipment or

expediting the equipment.

99.

While UGG and CWMM complained between themselves about FCC's

failure to expedite the equipment, they took steps to expedite

the delivery of equipment by Bisco, Ebco, Concise,

Transcontinental Engineered Products, Hansen, Buhler, Klockner

Moeller, Nord-Sen and General Railway. These expediting steps

included making cash payments to suppliers, approving necessary

change orders, choosing enamel paint for track instead of epoxy,

authorizing the shipment of equipment without shop testing,

authorizing shipment of equipment by air freight and writing

letters directly to the suppliers. While these steps may be

characterized as merely assisting FCC in the discharge of what

CWMM and UGG viewed as FCC's obligations, I consider that they

- 49 -

can more properly be viewed as conduct consistent with a

continuing obligation recognized by CWMM and UGG to ensure that

the equipment was delivered, if not in accordance with the

scheduling represented to bidders at the outset, then as soon

thereafter as that could be accomplished. If they were merely

assisting FCC in discharging its contractual obligation, I would

have expected UGG and CWMM to have been advising FCC throughout

of their expediting efforts. In fact the contrary occurred; FCC

was not so advised.

100.

In my view, CWMM continued to act after February 10 in a

manner inconsistent with a complete transfer of responsibility

for the equipment to FCC. On February 14, Campbell wrote to

Carter day in Winnipeg questioning the reliability of a supplier

they proposed to use. If FCC had assumed responsibility for that

equipment, one would have expected Campbell to have at least

copied FCC with the letter. He did not. The evidence at trial

showed many such instances of CWMM and or UGG dealing with the

equipment suppliers without advising FCC and in my view, this

conduct is consistent with an interpretation that the contract

imposed an obligation on FCC to purchase the equipment as UGG's

agent and not as an independent principal and that UGG continued

to be responsible for the timely delivery of the equipment.

101.

With respect to the parties course of conduct for the pre-

selected equipment I summarize my findings as follows:

- 50 -

1.

CWMM and UGG represented to bidders including FCC and

CMI that the equipment would be delivered to the site

approximately mid-March;

2.

3.

FCC and CMI relied on that representation in preparing

their tenders and plans to do their work;

CWMM and UGG knew as of February 10 that much of the

equipment would not be available for delivery by mid-

March, but nonetheless never advised FCC or CMI prior

to February 10;

4.

CWMM and UGG retained the responsibility for the design

and timely delivery of the equipment after February 10.

102.

103.

104.

This, in my view, is consistent with a plain reading of the

contract by which UGG was the effective purchaser of the

equipment under the letters of intent.

Further support for this interpretation is also found by

examining the conduct of the parties with respect to the

individual items of equipment.

The Rail Car Progressors were manufactured by Motion

Controls Inc. before the Terminal was shut down.

Two

progressors were installed on the dock and one progressor was

installed on the UGG property. The progressors were installed to

automatically advance railcars as part of the receiving function

of the Terminal. The Letter of Intent provided a purchase price

- 51 -

of $314,636.83 of which $228,458.68 was paid to Motion Controls

prior to February 10 and by February 20, the railcar progressors

were in storage in Vancouver.

105.

The Rail Car Retarders were manufactured by General Railway

Signal of Canada. The Rail Car Retarders function to stop the

railcars after shunting. The Letter of Intent provided for a

purchase price of $175,953.57. UGG issued a purchase order to

General Railway directly in that amount to become the importer of

record.

106.

In September 1988, General Railway advised that "delivery

could be completed within (120) one hundred and twenty days of

receipt of a Letter of Intent". There were three letters to

General Railway dated September 30, October 5 and October 27,

1988. The October 27, 1988 letter said "latest date for receipt

of equipment is February 18, 1989". On January 13 Somogyi wrote

to General Railway advising that "no equipment shall be shipped

before drawings etc. are reviewed by us." This equipment was

delivered May 4 after UGG had issued a purchase order direct to

General Railway on April 7.

107.

The Rail Car Gate Opener was manufactured by Concise

Technik. This is a machine that travels on a rail beside the

railcars and opens the railcars to allow grain to flow into the

- 52 -

hopper pits in the Track shed. The Letter of Intent provided for

a purchase price of $61,692.00.

108.

Concise's quote of December 14, 1988 provided for delivery

"11 - 13 weeks". The revised quotation dated January 6 also

provided delivery "11 - 13 weeks". The Letter of Intent dated

January 9 provided "projected shipping date March, 1989". Eleven

to 13 weeks from January 9 was between March 27 and April 10.

While the Letter of Intent required drawings within "ten (10)

working days after receipt of" the Letter of Intent, drawings

were submitted by Concise between March 6 and May 30. The final

shop drawings for Concise were checked and returned by CWMM on

June 6. The track arrived on site June 7 and the car opener

arrived on site in August. It had to be modified to fit a new

panel and became operational in the fall of 1989.

109.

The Receiving Bulkweigher was manufactured by Western Scale

Ltd.

The Bulkweigher is located in the Trackshed and weighs

grain being received while the grain is flowing through it. It

requires government certification prior to use. The Letter of

Intent dated September 1, 1987 provided for a purchase price of

$84,200.00 of which $60,000.00 had been paid by UGG to Western

Scale by February 10.

110.

The Receiving Bulkweigher was complete as of February 20 but

there were delays in UGG and CWMM getting the bulkweigher

- 53 -

certified so that grain could be received over it. Complicating

factors included changes to the software package in the fall of

1989 relating to the bulkweigher and changes in the

communications between the bulkweigher and the terminal

computers.

111.

The Primary Wheat Cleaners, the Wheat Reclaim Equipment and

the Reclaim Jack-Legs were manufactured by Carter Day Ltd. The

Wheat Cleaners are used to clean wheat after it is received into

the Terminal. The Wheat Reclaim Equipment and Reclaim Jack Legs

are used as a part of the process to make use of dockage and

other material cleaned from the wheat by the Primary Wheat

Cleaner. The Primary Wheat Cleaners are located on the Cleaner

Deck in the workhouse. The Wheat Reclaim Equipment and Wheat

Reclaim Jack-Legs are located in the Wheat Reclaim area in the

upper Workhouse. The Letter of Intent provided for a purchase

price of $1,140,922.48 of which $250,635.00 had been paid by UGG

to Carter Day prior to February 10.

112.

The equipment listed in the Letters of Intent dated

September 23, 1987 and November 2, 1988 was stored at Annacis as

of February 20, 1989. With respect to the Wheat Reclaim

Equipment listed in the Letter of Intent dated January 6, 1989,

on December 6, 1988 delivery was quoted to be "10 weeks from

receipt of approved drawings, with the exception of the elevator

belting. Quoted delivery on the belting is 12 - 14 weeks". This

- 54 -

Letter of Intent stated "projected shipping date early March of

1989". Twelve to fourteen weeks from January 6 was between March

31 and April 14, 1989. The first Carter Day shop drawings were

submitted to CWMM on January 26. The final shop drawings were

returned to Carter Day as being checked on March 1. The

equipment arrived on site between the middle and end of April,

1989.

113.

The Dual and Single Distributors were manufactured by Ebco

Industries Ltd. Distributors are turnhead machines which direct

grain coming into the machine from one or more spouts into other

spouts leading away from the distributor. D-1 is located in the

Workhouse on the Distribution Floor, D-2 is located in the

Workhouse on the Scale Floor, TH-1, TH-2 and TH-3 are located in

the Workhouse on the Bin Floor. The Letter of Intent dated

November 16, 1988 provided for a purchase price of $354,000.00 of

which $53,099.96 had been paid by UGG to Ebco by February 10.

114.

Ebco's quote dated November 10, 1988 which referred to

delivery "March 15, 1989 or earlier" also stated "all other

conditions are as per our original quotations # 1817 and # 1815".

Quotation # 1815 said "delivery would be approximately 12 - 14

weeks from receipt of approved shop drawings". Quotation # 1817

provided "delivery would be approximately 10 - 12 weeks from

receipt of approved shop drawings". The Letter of Intent did not

- 55 -

contain a delivery date. However, the tender specifications

provided for a delivery date of mid January, 1989.

115.

Ebco accepted the Letter of Intent on November 18, 1988 with

an amendment not included with the tender documents. On February

6, Ebco wrote to CWMM advising that they "may be unable to meet

the March 15, 1989 delivery deadline". The letter concluded "may

we rely on you to inform the parties of this situation". UGG and

CWMM did not so inform FCC. The Ebco distributors were delivered

by May 30 without motors. The motors were delivered in August,

1989. The last Ebco shop drawings were returned "checked" by

CWMM on February 8. Ten to twelve weeks from this date was

between April 19 and May 3.

116.

The Bucket Elevator Components were manufactured by

Transcontinental Engineered Products Ltd. and the Bucket Elevator

Drives by Hansen Transmissions Ltd. The bucket elevators are

used to elevate grain from the lower levels of the Terminal to

the upper levels of the Terminal. L-1, L-2, L-3, L 4/5, L 8/9

and L 11/12 are located in the Workhouse and L-28 is in the

Trackshed. The Transcontinental Letter of Intent dated November

15, 1988 provided for a purchase price of $594,322.82 of which

$91,783.78 had been paid by UGG to Transcontinental by February

10. The Hansen Letter of Intent dated October 4, 1988 provided

for a purchase price of $293,620.00.

- 56 -

117.

On October 12, 1988 Transcontinental provided its quote to

CWMM and said: "based on the Letter of Intent within the next 7

to 10 days, delivery of components should be completed by mid to

late February". The Letter of Intent dated November 15, 1988

provided "delivery required: March 15, 1989 or earlier". It

also required that drawings be submitted to CWMM "before

fabrication". Drawings were submitted between November 23, 1988

and May 15, 1989. The last drawing returned to Transcontinental

was checked by CWMM on May 19. The Bucket Elevator Components

were delivered to site mid May to beginning of June, with

miscellaneous equipment in July, and replacement buckets for the

defective buckets not delivered until the end of July. The

original buckets ordered for the elevators were defective and had

to be replaced.

118.

The Letter of Intent to Hansen dated October 4, 1988 said

"this equipment is to be delivered to UGG Vancouver latest week

of February 20, 1989." Hansen wrote to CWMM on October 31, 1988

taking exception to the Letter of Intent. An addendum to the

Letter of Intent was issued on November 25, 1988, but was not

included in the tender package. The addendum provided "both the

purchase specification and the Letter of Intent are applicable to

the additional equipment supply, including the date of delivery".

Hansen wrote back to CWMM again on November 30, 1988 taking

exception to the Letter of Intent. The Hansen drives were

delivered May 17. The Letter of Intent required submission of

- 57 -

certified drawings within "ten (10) working days after the date"

of the Letter of Intent. Drawings were submitted by Hansen on

January 18. The final Hansen check on drawings was returned by

CWMM March 15.

119.

Although the tender documents called for screw conveyors in

certain areas of the Terminal, eventually Bisco manufactured drag

conveyors were ordered and installed. Conveyors STB-3,STB-3A,

TBS-1, TBS-2, TBS-3, SBS-1, SBS-1A, SBS-1,2R, SBS-2, SBS-3, and

SBS-3A are located in the Workhouse in the Basement. Conveyors

RFC-1, RFC-2, RFC-3 and RFC-4 are located in the Wheat Reclaim

area of the Workhouse on the Bin Floor. Conveyors RFC-5 and RFC-

6 are located in the Wheat Reclaim and Scale Three area of the

Workhouse on the Bin Floor. The Letter of Intent dated January 9

provided for a purchase price of $179,988.00.

120.

On December 7, 1988 Bisco quoted for screw conveyors with a

proposed shipping date "10 - 12 weeks upon receipt of a Letter of

Intent". On January 5 Bisco supplied its quote for 6 drag

conveyors, proposed shipping "10 - 12 weeks upon receipt of a

Letter of Intent". On January 9 Bisco quoted for 17 drag

conveyors with no change in the delivery date. Ten to twelve

weeks from this date was between March 20 and April 3, 1989. The

Letter of Intent provided "projected shipping date mid March of

1989". In subsequent correspondence of January 12 and 13 Bisco

took exception to the Letter of Intent and did not sign it. The

- 58 -

Letter of Intent provided that drawings were to be submitted to

CWMM "within ten (10) working days". However, the drawings were

submitted by Bisco between February 6 and March 8, 1989.

The

final shop drawings were checked by CWMM and returned to Bisco

March 29. Their drag conveyors were delivered at the end of

April.

121.

Other drag conveyors were manufactured by Buhler-Miag and

supplied through its Canadian company Buhler Canada Ltd.

Conveyors DC-101 and DC-103 were located with the head end of

each conveyor in the Workhouse on the Bin Floor and the tail end

of each conveyor on the roof of the North Annex. Conveyors DC-

102 and DC-104 are located in the North Annex on the Bin Floor.

Conveyors DC-105, DC-106, DC-107, and DC-110 are located on the

Bin Floor in the South Annex. Conveyor DC-109 has its head end

on the Bin Floor in the Workhouse and tail end on the Bin Floor

in the South Annex. Conveyor DC-201 is located in the Workhouse

on the Distribution Floor. Conveyors BD-2 and BD-2A are located

in the Workhouse in the Basement. The relative significance of

the Buhler equipment on this project can be seen from the amount

of the purchase price in the January 9 letter of intent of

$1,946,764.20, of which UGG had paid $183,657.00 by February 10.

122.

In November 1988, Notter of Buhler had attended in Vancouver

to solicit the drag conveyor contract with UGG. At that time he

told Campbell there would be difficulties with March/April

- 59 -

delivery. On December 9, 1988 Buhler submitted its quote for the

drag conveyors. The quote contained the following with respect

to delivery:

"Delivery of equipment would be approximately 4 - 5

months after receipt of written order and settlement of

all technical details, ie. 3 months after receipt of

approved layout drawings. Based on receiving the

Letter of Intent on or before December 16, 1988 layout

drawings submitted and approved week of January 16,

1989, fabrication to commence immediately with shipping

to start the 2nd half of March, 1989 with final

shipment 2nd half of May, 1989. This preliminary

schedule to be discussed. Bar chart will be submitted

2 - 3 days after receipt of Letter of Intent".

123.

124.

The quote also provided that 10% of the total contract price

would be due with the Letter of Intent or order, whichever came

first.

On January 9 CWMM sent its Letter of Intent to Buhler which

provided "projected shipping date mid March of 1989". This did

not conform to Buhler's quote and Buhler rejected it. On January

14 Notter sent a fax to Campbell requesting 10% of the contract

which was due according to the Buhler quote and enclosing a

preliminary project schedule as promised in the Buhler quote

which showed Buhler delivery going into July, 1989. If the

parties intended the successful contractor to assume

responsibility for the timely delivery of this equipment,

communications of this nature ought to have been disclosed to the

bidders before the contract award February 10.

- 60 -

125.

Although Campbell intended to try to improve the proposed

Buhler delivery schedule after receiving the January 14 fax, the

discrepancy between the mid-March date represented to bidders and

the January 14 schedule was highly material. Campbell estimated

that the work associated with the Buhler bin floor conveyors

comprised approximately 30% of the project. Given the amount of

work that the Buhler equipment represented on the project, had

UGG intended to transfer the responsibility for the timeliness of

the Buhler equipment delivery to FCC on February 10, I would have

expected an immediate communication to FCC as the successful

bidder on February 10 or very shortly thereafter respecting the

true state of affairs. This never occurred. FCC only started to

learn of this after February 10 when Whitaker contacted the

equipment suppliers and put together his first Pre Purchase

Vendor schedule. The January 14 fax from Buhler was never

disclosed to FCC. Skodje of FCC testified that if the January 14

fax been disclosed, FCC would have suggested a change to the

completion commitment of the Project.

126.

The January 9 Letter of Intent required drawings to be

submitted to CWMM within "ten (10) working days after receipt of

the" Letter of Intent. Buhler submitted drawings between

February 7 and April 12. Somogyi testified that representatives

of Buhler were supposed to come out during the month of January,

1989 to discuss drawings with CWMM. This did not occur. FCC was

unaware of this before the contract was awarded February 10.

- 61 -

Representatives of Buhler did come out to visit CWMM during the

first part of February, 1989 to discuss layout drawings. The

layout drawings were finalized, checked and returned by CWMM by

May 19. Buhler drag conveyors were delivered between mid May and

July 20, with inspection gears delivered in August.

127.

128.

Klockner-Moeller supplied the motor control centres. The

motor control centres control the various equipment motors and

pneumatic gates in the Terminal. The Letter of Intent dated

December 13, 1988 provided for a purchase price of $70,850.40.

The Klockner Moeller Letter of Intent provided for a

projected shipping date "March of 198[9]". Hammond did issue the

marked up shop drawings for approval February 22 by which time

not all shop drawings had been completed. The equipment arrived

on site between the end of April and June 19.

129.

Although there are no specifications in the Prime Contract,

a Letter of Intent dated January 9 was issued to Nord-Sen

Industries to manufacture new gates for existing conveyors in the

Terminal. These gates open and close pneumatically to allow

grain to fall into spouting or bins. The Nord-Sen Gates were for

modified existing drag conveyors B-1, B-2 and DC-2. All of these

conveyors are located on the Bin Floor in the South Annex. The

Letter of Intent provided for a purchase price of $192,920.00.

- 62 -

130.

The Nord-Sen Letter of Intent provided for "projected

shipping date mid March of 1989". The letter was signed by Nord-

Sen on January 24. The letter required certified drawings

"within ten (10) working days". Nord-Sen submitted drawings

between January 7 and April 4. Subsequently, Nord-Sen was asked

to manufacture the same type of gate as Buhler. The Nord-Sen

drawings were not finalized until the Buhler gate drawings had

been finalized. CWMM transmitted the drawings for DC 2 on May 1

and the end gates for conveyors B1 and B2 on May 8. Nord-Sen

could not start manufacturing until these drawings had been

received. The Nord-Sen gates were not completely shipped to the

site until the mid to the end of July. The last of the Nord-Sen

gates arrived at site on August 2. Repairs were carried out on

the gates between August and October.

CONCLUSION

131.

I conclude that whether the terms of the Prime Contract are

taken on their own or in conjunction with the parties' conduct,

the result is the same. FCC had no obligation and assumed no

obligation under the Prime Contract to expedite the design or the

manufacture of the preselected equipment. FCC purchased the

equipment only as agent for UGG and at no time did FCC assume or

have any obligation in respect of the equipment other than to

arrange for delivery and take delivery once the equipment had

been manufactured. FCC was obliged to take delivery and install

- 63 -

the equipment, but defects in the equipment were at UGG's risk

until after substantial performance when FCC's one year warranty

became effective. Accordingly I find that UGG and CWMM remained

responsible for the timely completion of the design and

manufacture of the preselected equipment, as well as its

availability for timely delivery to the site.

PROJECT DELAY

(a) INTRODUCTION

132.

133.

I now consider the factors said by the parties to have

delayed the progress of the work. For each, I consider whether

the evidence can support a finding that the factor alleged was in

fact an effective cause of delay.

It is to be noted that FCC says it is not advancing a

"delay" claim. It says it is not suing to have the contract time

extended. Rather FCC's claim is for damages for the contract

breaches and/or the negligent misrepresentations of UGG and CWMM.

The damages for which FCC claims entitlement are its costs

incurred in being forced to stay on the project until substantial

performance was declared by CWMM on December 29. FCC does not

advance any impact or productivity loss claim for the

dislocations to its original plan of work that the acts or

omissions of UGG and CWMM are said to have caused. CMI similarly

does not advance a delay claim, but rather a claim against FCC

- 64 -

for breaches of the subcontract, for most of which FCC in turn

claims indemnity from UGG and CWMM.

134.

The defendants say that FCC and CMI have failed to prove how

many days of delay were sustained by reason of the alleged

breaches of contract or negligence, whether those breaches are

examined individually or taken collectively. This requirement

would of course apply if FCC were seeking a contract extension.

135.

However in this case FCC and CMI advance claims for damages.

Accordingly they must demonstrate on a balance of probabilities

that the matters complained of delayed or disrupted them in their

work and caused losses, in FCC's case measured by its extra time

spent on site. If FCC succeeds in its proof, then, subject to

the contractual defenses advanced by UGG and CWMM, it is entitled

to recover the damages that flow from the contractual breaches or

negligence. CMI is similarly entitled with respect to its

claims.

136.

In its very detailed analysis in final argument CWMM traced

the history of the project in support of its contention that FCC

and CMI have failed in their proof. CWMM set out the timing of

the delivery to site of the preselected equipment and its

subsequent installation. Where there is a time gap between these

events, it submits that is proof that the late delivery of the

equipment could not have delayed the contractors' work on site

- 65 -

and it says that FCC and CMI have failed to prove that the

alleged acts or omissions delayed them in their work. If this is

so, there can be no recovery on this portion of their claims

since ultimately, to succeed, FCC and CMI must establish that the

defendants' acts or omissions complained of were the proximate

cause of the losses they say they sustained, in FCC's case in the

form of being onsite for an extra 4 months, and in CMI's case in

acceleration costs, productivity losses and its additional

overhead costs.

137.

However, in my view, CWMM's analysis is overly simplistic

insofar as it presupposes that a contractor would be waiting at

the site with forces at the ready to immediately install

equipment as delivered. This ignores reality. There may be many

good reasons why equipment is not installed upon arrival. In his

evidence Steel testified that a contractor tries to "smooth out"

the work so as to avoid as much as possible variations in work

load from week to week. As an example he says a contractor will

not crew up one week to rush through work and then be left the

following week with much less to do and hence with its forces

either under utilized or laid off. In my view that is the

weakness in the submission that a time gap between equipment

delivery and installation means that the equipment deliveries did

not cause a delay.

- 66 -

138.

In argument counsel for CWMM said that FCC has not provided

any explanation as to why work was not done when it was planned

or why the changes to its plan through the course of the project

delayed it past August 31. CWMM put this question: Has FCC

proved that it suffered loss or damage flowing from the alleged

breaches of contract? While conceding that where loss or damage

flows from a breach the court is required to quantify the loss as

best it can, CWMM says FCC has not proved any loss. It further

says that FCC asks the court to assume it suffered a loss by

reason of its late completion instead of satisfying the burden

upon it of proving the required causal link between the alleged

acts or omissions and the late completion.

139.

However one of the critical points in this project was the

date by which all work on the project was on the critical path.

That is to say when all of FCC's float time was used up and when

the delay of any part of the work would necessarily and in spite

of FCC's efforts in mitigation, delay substantial performance

past August 31.

140.

Campbell expressed his view of the status of the project in

a June 28 fax to Maxi-Lift with respect to some defective

buckets in which he said:

"On June 19 we advised the general contractor to stop

work on the bucket installation. This project is

running 2 x 9 hour shifts per day and we are on a crash

schedule to be fully commissioned by September 1/89."

- 67 -

141.

On discovery, Campbell confirmed that by crash schedule he

meant that all work on the project was on the critical path. So

it was Campbell's view by June 28 that any delay to any part of

the work from that time forward would necessarily delay the

August 31 substantial performance date.

142.

However, it is also clear that simply proving that events

occurred later than scheduled does not constitute proof that the

events caused delay. Post hoc does not necessarily mean propter

hoc. I accordingly propose to consider all of the "delaying"

factors alleged by the parties to see if FCC and CMI have

discharged the burden of proof upon them of proving the necessary

causal link which the law requires before holding that a party is

entitled to recover damages in negligence or breach of contract.

(b) FCC ALLEGED DELAY FACTORS

(i) PRE-SELECTED EQUIPMENT

143.

FCC did not learn that much of the pre-selected equipment

was going to be delivered later than the mid-March date in the

letters of intent until after it was awarded the contract on

February 10. After that date Whitaker contacted the equipment

suppliers and obtained their estimated delivery dates. On

February 20 he prepared the first of a number of schedules

showing anticipated delivery dates for the equipment. This was

tabled at the first site meeting on February 21. The defendants

- 68 -

say that FCC cannot complain about the equipment as a causal

delay factor because it learned what might be termed the true

state of affairs by the end of February and certainly before it

signed the prime contract on March 29.

144.

It is clear that FCC and CMI changed or adapted their plans

of work to accommodate the changes in equipment delivery. It is

therefore necessary to consider the evidence as to whether FCC or

CMI were actually delayed in the progress of their work by the

equipment deliveries.

145.

The evidence of FCC and CMI is consistent. In the records

made at the time and in their trial testimony, the plaintiffs'

witnesses identified equipment delays as causing delays to their

work. Steel's daily site reports show a consistent recording of

the impact the late equipment was having on the progress of the

job. Whitaker's construction schedule tabled at the September 7

site meeting shows his calculation of the impact of the late

equipment deliveries. However in my view any doubt as to the

impact of the late delivery of equipment can be resolved by the

evidence of CWMM and UGG.

146.

On May 16 at a secondary meeting following the regular site

meeting attended by representatives of FCC, UGG and CWMM, Buhler

was discussed in detail. At that meeting the President of UGG,

Moore, expressed his view that Buhler had "lowballed" its tender

- 69 -

in order to get the job and was now holding the job up for

ransom. Moore also pointed out that the "issue" was Buhler.

Derhouson advised those at the meeting that the float in the

contract at the back end had now been used up. Moore advised the

meeting that UGG took the contract with Buhler on honourable

intentions and would fight it out with Buhler in the courts and

the newspapers. According to Moore, Buhler's request for an

additional $75,000 to accelerate was not the issue, it was the

principle. If UGG paid one supplier then all suppliers would try

it.

147.

On the same day Campbell sent a 14 page fax of the

background on Buhler to Van Dyke. One document entitled "Buhler

Saga" confirms that Buhler's quote was based on a Letter of

Intent dated December 16, 1988 and layout drawings January 16,

1989 which would lead to shipping in the second half of March and

final shipping second half of May, 1989. It also confirms that

UGG received the January 14 fax showing the later deliveries.

148.

On May 19 Pope recorded in his notes a discussion between

Moore, Eigenmann and Notter. Pope's notes refer to a discussion

of the Buhler schedule and state that the schedule "indicated

that 'drags' seemed to be the only area to jeopardize our

completion schedule of September 1, 1989". The notes also

confirm that Buhler advised Moore that the best Buhler could do

would be the end of July, and that Moore advised Eigenmann and

- 70 -

Notter that every day UGG was out of business it was $140,00.00

to $150,000.00 loss of revenue, which was "very severe". Moore

also advised Buhler that the end of July was "no good".

149.

On or after July 27 in an undated note regarding Buhler, Van

Dyke wrote:

"Talk to Murdoch about deducting job delay costs from

FCC re BM[Buhler] deduct from $75,000.00 O.T. payment.

There will be charges from FCC.

BM did not complete their contract before shipping:

(1)(a)(1) 36 limit switches and brackets left

off

(2) They relaxed tolerances to improve

time, i.e. deliberate substandard

fabrication on 48-1/8" opening.

(3) No match marking of gates to

openings."

150.

On July 28 Van Dyke also made a list of items that he wanted

to discuss. In this list he stated:

"Anticipate "extension of contract" wanted by FCC due

to "hold" on pulling chain and interference due to BM

problems due to the gate problem tolerances. Also

expect "delay of job" charges from FCC. They are going

to try everything to extend their completion date. Don

Steel always alludes to "going to really affect

schedule". Expect fax from Ray by Tues. Suggest BM be

made responsible for these charges."

Van Dyke's notes suggest that Buhler:

"relaxed the tolerances on openings...deliberate

substandard fabrication to ensure delivery...no match

marking of gates to openings as required by contract"

- 71 -

The notes also indicate Van Dyke's comment:

"respond to commissioning schedule. Blatant about

being behind."

151.

While Van Dyke did not realize when he made this note that

the failure of Buhler to matchmark the gates to the openings as

required was by agreement between Buhler and CWMM reached in

April without FCC's knowledge, it nonetheless demonstrates his

view at the time of the effect on the project scheduling of the

timing of the Buhler deliveries and the state of the Buhler

equipment when it was delivered.

152.

Most significantly, on August 24, in a report to his client,

Campbell identified the late delivery of equipment as one of the

facts relevant to FCC's inability to attain substantial

performance by August 31. In that letter to Pope, he confirmed

his verbal advice that the contract with FCC would not complete

by August 31. He set out the most optimistic estimate for

completion of spouting and gates to be mid to end of October.

Campbell projected electrical control, instrumentation work into

November not including "an apparent impasse with respect to

completing work on the dock progressors". He then listed as some

relevant facts: late delivery of owner preselected equipment, and

that the manhour projections by FCC based on the contract were

not being met.

- 72 -

153.

154.

155.

At trial in cross examination Campbell was asked if he had

reviewed documents during the course of the project to ascertain

if FCC had been delayed in part due to late equipment deliveries.

His response was that FCC was not so delayed. After a followup

question, he asked which documents were being referred to by

counsel. He was then referred to his discovery evidence where he

said that he had reviewed documents to ascertain whether the late

equipment deliveries had delayed FCC. On discovery he then said

he couldn't remember if he had reached any conclusions after

conducting that document review.

I found Campbell's trial testimony on this point

unsatisfactory. In his evidence he appeared to me to be trying

to justify a conclusion reached somewhat later in the fall after

the relations between the parties had soured considerably and

when he was doubtless attempting to bolster the position of CWMM

and UGG. No explanation was offered as to why the conclusion he

stated in his August 24 letter was not accurate. I find that

when he wrote the August 24 letter to his client, Campbell

believed that the equipment delays were a relevant factor in the

failure of FCC to achieve substantial performance by August 31.

On his discovery, Van Dyke testified that he knew in August

1989 that the late delivery of the equipment as well as the

changes to the drag conveyors had the effect of delaying CMI in

its work.

- 73 -

156.

After the regular site meeting on September 7, MacKay, Pope,

Graham, Van Dyke, Campbell, Skodje, Derhouson, Marquis and

Whitaker met to deal with the equipment delivery impact. At this

meeting an impact schedule prepared by Whitaker and showing

completion in late December, 1989, early January, 1990 was put

forward and discussed. In this schedule Whitaker demonstrated

the impact of the delay in the delivery of the preselected

equipment on FCC's progress on the project. Van Dyke testified

that he understood that FCC's position was that the late delivery

of the preselected equipment was the fault or the blame or the

responsibility of either CWMM or UGG.

157.

On October 5 a meeting took place at UGG's office attended

by MacKay, Pope, Van Dyke, Campbell, Nicholls, Skodje, Marquis

and Whitaker. At that meeting documents were presented to UGG

and discussed including Whitaker's final Pre-Purchase Vendors

List, the tender schedule, and a separate sheet for each of the

equipment suppliers showing tender delivery versus actual

delivery. A schedule comparison between the tender schedule and

the equipment delivery impact, was also provided, based on 45

hours per week per shift and based on 37½ hours per week per

shift (i.e.-- if no more premium time was worked). The schedule

showed actual installation of mechanical equipment extending to

September 11, electrical installation projected to extend to the

end of December, spouting installation projected to extend to the

- 74 -

end of October, dust control projected to extend to the end of

November, pneumatics installation and hydraulics projected to

extend to the end of November, with testing, start-up and

commissioning extending to the end of December. No one from UGG

or CWMM disputed any of the information presented by FCC in any

of these documents at the meeting, or in writing afterwards.

158.

Van Dyke's notes record Skodje advising those attending that

FCC "would like to demonstrate to you how and why time was lost

and circumstances that brought it about". Whitaker then gave out

a package of "back up documents". What followed was a discussion

concerning the impact of the delivery of the equipment. In that

discussion Skodje pointed out that everything appeared to come

later than portrayed in the Letters of Intent. Van Dyke records

him saying "If knew this why was this not portrayed in tender

call. All expected people to deliver on time.

No vehicle in L

of Is to permit FCC to...commitment UGG made on 'unknown

contractor' - let him believe that dates would be adhered to".

Skodje was clearly referring to FCC's reliance on the delivery

dates in the Letters of Intent in bidding the project.

159.

In my view the foregoing demonstrates that by August, 1989,

Campbell and Van Dyke had concluded that the delays in delivery

of the preselected equipment delayed FCC and CMI in the progress

of their work and that substantial performance would, as a

consequence, occur later than August 31. Their assessments are

- 75 -

consistent with the evidence of FCC and CMI and I conclude that

FCC has established the requisite causal link between the late

delivery of the preselected equipment and the delays it

encountered in carrying out its work which resulted in work on

the project continuing past August 31.

(ii) ADMINISTRATION BUILDING

160.

The new administration building was constructed by PCL

independent of the FCC contract. However, FCC was obliged under

its contract to install tie-ins to the new building so grain

could flow to the sampling rooms of the Canadian Grain Commission

and UGG in the building as well as installing the new controls in

the control room. FCC contends that it was unable to complete

this work on time because the administration building was

finished late.

161.

On April 14 PCL forwarded its schedule for the construction

of the Administration Building to Campbell who noted on the

schedule that PCL would be "out of control room & control room

100% complete before August 7". FCC required access to the

control room after PCL was finished to do its work under the

Prime Contract. On April 15, at a meeting attended by Van Dyke

and Campbell, it was confirmed with PCL that the control room

must be complete by July 24. Additionally, the minutes of the

meeting note that the control room console details were to be

finalized as soon as possible.

- 76 -

162.

On May 3, at the Administration Coordination Meeting no. 1,

the meeting notes indicate that pipe bridge drawings and

specifications were required in order to tender the pipe bridge

work, that the basic penthouse was scheduled to be complete to

the point where FCC could commence installing piping by July 10

and that approval of the control room layout was required from

UGG in order to complete the work by July 24.

163.

The minutes of the June 15 site meeting record FCC

requesting whether CWMM or UGG have any preferred start up

procedures. The minutes also record that CWMM requested that any

new or added work be assessed "with regards to schedule

deadlines, prior to work being done".

164.

Also at that meeting a new schedule prepared by Whitaker

showing construction completion by September 4 and commissioning

by September 11 was turned over to all present. That FCC

schedule was contingent on a number of matters being completed by

certain dates as set out in the minutes as follows:

"16.003.17

The schedule was turned over to all

present, with the following

clarifications; subjects:

A)

That all B.M. chains

are shipped by June

19/89.

B)

That all remaining

B.M. equipment is

- 77 -

shipped by July

7/89.

C)

D)

E)

F)

That Nordsen meet

their 3 shipping

dates. First load

June 25/89, second

July 5/89, last

July 15/89.

That we are allowed

to begin our tie-ins

to the office

control room and

sampling room on or

before July 17/89.

That we are able to

begin work on the

dock progressors and

north end loop on or

before July 17,

1989.

That all "Holds" on

drawings are removed

prior to June 30/89.

FCC and their subtrades are

requested to review and advise

of any holds that they feel

are existing."

(emphasis added)

165.

166.

The urgent nature of the foregoing items is consistent with

Campbell's view in his June 28 fax to Maxi-Lift referred to above

in which he stated that by then the project was on a "crash

schedule".

The site minutes of June 22 record UGG's response that to

the best of its knowledge the office building would be ready for

tie-ins by July 17.

- 78 -

167.

On June 28 the Administration Building Coordination Meeting

#3 minutes noted that the revised pipe bridge drawings were not

issued as yet, and that furniture would be required on site

August 21 with staff "to commence start-up in building in mid

August." The minutes noted a letter from PCL dated June 27 which

was attached to the minutes and provided for penthouse erection

occurring the week of July 10, pipe bridge erection the week of

July 10 and completion of the control room July 28. The letter

also referred to UGG staff commencing a start-up in the building

including training sessions stating that the building would be

available September 1, but no air conditioning until September

29.

168.

The minutes of the July 19 Administration Building

Coordination Meeting #4 noted a prediction that FCC could

commence work in the building on July 31, that the interim

turnover date for the building was still the first week of

September, and that air balancing for the building would not be

completed until the end of September.

169.

On August 16 the minutes of the Administration Building

Coordination Meeting #5 record potential delivery of the air

conditioning units in October or November, the anticipated

turnover date for the building was September 15, the building

must be ready to commence the start-up of grain movement by not

later than September 15 and UGG's request that the annunciator

- 79 -

panel for the entire complex be located in the administration

building, which would require a fire alarm panel change.

170.

Also on September 5 Ryan of PCL wrote to Campden with

respect to the administration building advising of delivery of

air conditioning units in October and requesting information with

respect to the annunciator panel for the fire alarm to be

installed in the administration building.

171.

Additionally, on September 7 at the Administration

Coordination Meeting #6, the minutes note that the date of

substantial performance of the Administration Building was

scheduled for October 2 and that it was anticipated that 57

people would be occupying the building after this date. The

annunciator panel is referred to as not having been finalized,

the air conditioning units were due to be installed by October

17, and sprinkler tests and verification was required for the

occupancy permit. The minutes also note that "no further

meetings are scheduled unless required to resolve the issue of

the Occupancy Permit,....".

172.

On September 12 representatives of UGG met with

representatives of CWMM to discuss the electrical and engineering

status.

Van Dyke's notes record that Campbell had a "concern re

control philosophy. No control devices yet installed. Need

realistic indication of where [at]". He also noted that a report

was needed with respect to "dock time completion". Van Dyke's

- 80 -

notes make it clear that there were many outstanding electrical

and engineering items, including those relating to the Canadian

Grain Commission, the PLC and computer programming, and the

preparation of an operations manual and control philosophy which

were slated to be ready by September 21. Also, in response to

the question "when R & S complete" it was noted "maybe end of

October to run grain - still need more time to get into

production".

Hammond testified that at no time did he think

Ricketts-Sewell was not diligently prosecuting its portion of the

work under the contract.

173.

At a September 19 meeting Van Dyke noted:

"owner late delivery

-

Samples and changes to sampler system was

completely designed

-

Drag conveyor section designs were

late..."

174.

On October 13 Campbell sent a memo to Van Dyke confirming a

telephone conversation they had that morning in which Campbell

records "chase Campden and PCL to complete return sample hopper

installation so that FCC and PCL get out of the office

administration before the end of the week".

175.

On November 2 Campden issued the certificate of substantial

performance for the administration building. On the same day PCL

returned its signed contract to UGG. The PCL contract provided

- 81 -

for substantial completion of the Administration Building by

October 20, 1989. FCC was never advised of this date. The

Administration Building was needed for the operation of the

Terminal and was required to comply with safety standards and

Labour Canada Codes.

176.

177.

On January 4, 1990 the City of Vancouver granted an

occupancy permit for the Administration Building. The permit

certified that the Administration Building "may now be occupied

in accordance with the approved occupancy herein described".

From the foregoing it will be seen that the original date

for substantial completion of PCL's work on the administration

building was August 7. It is clear that PCL's schedule slipped

steadily through the summer of 1989 with the result that

substantial completion was not granted until November 2. This

delay of necessity delayed FCC in carrying out the work it was

required to do under its contract with UGG. Until PCL finished

the control room, FCC could not complete its work in that area.

PCL's original schedule was to be out of the control room with

the room 100% complete by August 7. On June 15 FCC stated at the

site meeting that the schedule it was tabling that day showing a

completion date of September 4 was conditional on FCC being

allowed into the control and sampling rooms to begin their tie-

ins by no later than July 17. This did not occur. As early as

- 82 -

June 27 PCL was predicting a completion date of July 28 for the

control room.

178.

It is clear that FCC had to follow PCL in the administration

building. There is also no evidence that construction of the

administration building was slowed by CWMM because FCC was

running late on other contract work. Had PCL's work been

deliberately delayed by CWMM because FCC was going to finish

later than August 31 because of other concurrent delay events the

fault of FCC, that would sever any causal link between the late

completion of the administration building and FCC's losses.

However that did not occur. The evidence is that PCL finished at

the end of October instead of August 7, and hence I conclude that

the late completion of the administration building prevented FCC

from completing its contract work in that building until well

into November.

(iii) STATE OF PROJECT DESIGN - VOLUME AND TIMING OF DRAWING

DELIVERIES

179.

FCC and CMI say that CWMM had not completed the design of

the project to the extent to which the law says a tendering

contractor on a lump sum bid is entitled to rely. Earlier I

dealt with the impact of the late delivery of the preselected

equipment which the plaintiffs say was caused at least in part by

CWMM design delays. In this section I deal with FCC's contention

that the overall design of the project was late and that the

- 83 -

number and timing of the drawings eventually released by CWMM

delayed FCC and CMI in their prosecution of the work.

180.

In Ex 92 FCC summarizes these drawings and sketches and

their release dates. While this chronology affords some support

for FCC's case, those facts by themselves do not establish that

the timing of the drawing releases delayed the work. It is

necessary to review the evidence in order to make an assessment

as to whether the release of drawings through the course of the

project were an effective cause of delay. In considering this

evidence it must be borne in mind that this was a complex refit

project, that all parties understood this at the outset and that

a certain number of drawing revisions were to be expected as work

proceeded. However that being said, the owner still had an

obligation to ensure that the state of design was sufficiently

finalized prior to tender on this lump sum project so that the

progress of the contractors work would not be unreasonably

impacted.

181.

The difficulties experienced with drawing deliveries and the

reasons therefore were related at trial by Steel who testified

that when he expressed his view to Campbell that "the plant just

wasn't there yet, the design wasn't there", Campbell told him

that "they had wished that they had had more time with the design

also, that they felt it went to tender a little earlier than what

it should have."

- 84 -

182.

In my view Steel's evidence as to what Campbell told him

illustrates what was at the root of one of the significant

problems on this job. The design was not sufficiently advanced

when the project went to tender to allow it to be built in the

time allotted. This caused the equipment to be ready later than

planned and it also caused the engineer to be faced with the task

of having to continue designing as the project was being carried

out.

183.

184.

At the first site meeting on February 21 FCC sought

clarification concerning the release of "holds" on the bin floor

drawings. CWMM promised release of the holds would be

forthcoming.

On March 2, Whitaker wrote to Campbell concerning holds on

drawings, an item appearing frequently in subsequent site minutes

and other documents. At the site meeting of March 2 the minutes

record that FCC required release of bin floor drawings which were

on hold:

"Upon review of the revised schedule

overview, it was noted that certain delivery

dates required to meet previous planning

schedule may not be met.

Therefore, discussions regarding approach to

improvements brought forward certain

suggestions as follows:

A)

Drawings on hold must be released

on basis of current information

(see 1.008).

- 85 -

185.

These drawings included the bin floor drawings. Popowich

testified that CWMM's failure to provide those construction

drawings "meant that we couldn't proceed with the detailed shop

drawings and consequently a fabrication of -- -- our work related

to the particular construction drawing".

186.

187.

At the site meeting of March 7 the minutes record FCC's view

that the hold on the bin floor drawings was becoming critical and

the drawings should be released. FCC again asked that drawings

be released in their current state by CWMM.

On March 8 CMI wrote to FCC to notify them that their

Edmonton affiliate had halted manufacturing spouts for the bin

floor conveyors:

"As previously discussed, the present hold on the

Construction Drawings and in particular the Bin Floor

Conveyors #5542 is forcing us to halt manufacturing

from our Spruce Grove facility.

If this matter continues long term delivery problems could

result."

188.

At the site meeting of March 14 the minutes record CWMM's

advice that they were still working on the structural drawings

FCC had said was required the week before. The issue of gates

was again raised; CWMM was asked to complete the gate schedules

on the drawings. With respect to changes on the construction

drawings, the minutes note:

- 86 -

"FCC enquired as to procedure for dealing with the

changes on the construction drawings (From Tender set).

CWMM advised that we are to proceed with the work in

accordance with the "latest" issue for construction

drawings and that they will issue a change order to

cover.

FCC requested all trades to price the changes as soon

as possible to finalize differences."

189.

The site minutes of March 21 note that the question of

missing information not shown on drawings and the issue of

proceeding with changes before receipt of a change order were

raised again. Also appended to the minutes was a list of eight

construction drawings that were either not issued as of March 16

or which had been held.

190.

On March 23 Marquis wrote to Campbell passing along CMI's

letter of the same date advising that they had been delayed

approximately two weeks due to drawing delays. Popowich

testified that CMI "needed the drawing to confirm the location of

the modified conveyor in the north annex."

191.

At the April 4 site meeting CWMM advised that it was

redesigning the brackets for the Bisco drag conveyors. At the

same meeting, FCC reported five to six drawings still on hold

with some drawings not issued for construction. Steel testified

that the drawings listed were important to completing the work.

- 87 -

192.

On April 7 Campbell advised Marquis that CWMM was revising

the tail end of DC 105 and to hold all spouting relating to DC

105. He also advised FCC to hold details 1/102 and 2/102 on

drawing 5542-S102. This drawing detailed the intermediate bin

floor drag conveyor supports. The April 11 site minutes also

note five drawings still not issued or on hold and record a

request by CWMM for FCC to look into alternative methods of

hanging the bin floor conveyors. This request related to the

hold that was put on the bin floor conveyor drawing on April 7 by

Campbell.

193.

At the site meeting of April 18 the minutes note that

information had been received with respect to the brackets

required to hang the Bisco drag conveyors. The minutes also note

that there were still four drawings on hold. FCC requested a

"CCN [contemplated change notice] for the change in conveyor

length because of the impact it would have on other trades for

new gates, pneumatics, controls, etc". At the April 18 site

meeting FCC produced sketches for consideration for the conveyor

hangers that had been put on hold by Campbell on April 7. A

change was also requested to be confirmed by CWMM for the

addendum to the Hansen Letter of Intent that was missing from the

tender package.

- 88 -

194.

195.

Steel's April 20 Daily Report notes that FCC had repeated a

request for design answers, and further noted that it appeared

that CWMM could not keep up.

At the April 25 site meeting the sketches and method of

structural connections with respect to the bin floor conveyor

hangers that had been proposed by FCC at the previous meeting

were agreed, and CWMM "advised concurrence by Buhler". FCC

requested further information with respect to the additional

length of Buhler conveyor and noted that the information is

required "ASAP". The minutes also record in item 10.014 that FCC

requested approval of AI shop drawings, which had been submitted

several weeks before.

196.

197.

On April 29 Campbell advised Marquis by fax to put a hold on

a spouting line on drawing 5326-M156.

The May 2 minutes note that drawings were still on hold,

that CWMM would not allow alternate suppliers for idlers for

conveyor C2, and that work on DC 105 respecting the CWMM memo of

April 7 had been held up for two weeks.

198.

On May 2 Popowich sent a fax to Harrish in Edmonton which

said:

"CWMM had to revise the standard spout gate

to look something like the attached sketch.

IECO have requested that we give them a price

- 89 -

to supply and install these sections as they

are unable to complete this work."

199.

On May 4 CMI gave notice to FCC that CMI was being prevented

from crewing up on the project due to several occurrences of

delayed information, delayed decision making and delayed supplies

of equipment for the upper workhouse, the workhouse and the bin

floor annex. On May 6 Whitaker faxed Campbell requesting

information on the conveyor supports to come for conveyors DC 101

and DC 103.

200.

The May 9 site minutes also record that CWMM had eliminated

two of the four drawings still on hold. FCC advised CWMM and UGG

that crews would be increased as more equipment arrived, and that

a second shift would be initiated once the day shift had reached

its maximum capacity.

201.

202.

In an FIR dated May 10 FCC requested support details for

conveyor DC109. FCC's sketch of support details was approved on

May 18.

On May 12 CMI wrote to FCC and listed eight spouting

drawings which they had not yet received for construction. On

May 15 CMI issued RFC [Request for Clarification] 17 listing

spouting details that were on hold. These drawings were needed

to enable CMI to mark holes in the concrete floors in the north

- 90 -

and south annexes that FCC were required to cut to allow spouting

to pass through.

203.

204.

The minutes of May 16 record another request for information

on the supports for conveyors DC 101 and 103 which was required

by FCC. The minutes of May 23 record FCC's request for conveyor

head support drawings for DC 101, 103, 105, 106 and 107.

The relevant portion of the June 15 site minutes recorded:

"16.003.17

The schedule was turned

over to all present, with

the following

clarifications; subjects:

...

F)

That all "Holds" on

drawings are removed

prior to June 30/89.

FCC and their subtrades are

requested to review and advise

of any holds that they feel

are existing."

205.

As noted earlier, the schedule turned over on June 15 showed

construction being completed by September 4 and commissioning

being completed by September 11. In my view, a review of the

documents authored by Van Dyke and Pope show that all present at

the meeting understood that the schedule that was being handed

out on that day was premised on the conditions set out in A

through F being met. This did not occur.

- 91 -

206.

On June 15 Whitaker sent a fax to Campbell listing drawings

for FCC's subcontractors that were still at CWMM awaiting review.

On June 27 Campbell advised the CWMM site representatives that

there would be revisions on the head end of DC 110 issued on the

next day. Additionally, Transcontinental sent a fax directly to

Campbell with respect to the problem being encountered with the

maxi-lift buckets which did not fit properly on the leg belts.

207.

By the end of July most of the drawing holds had been

released. However some drawing holds resulted in extra work. On

August 26 Campbell sent a fax to Van Dyke advising that the C5-C9

drawings would be finished by the end of August. The drawings

related to a change to conveyor C5-C9 which eventually led to a

change order.

208.

209.

On September 5 Weingand wrote to Koga advising of the change

for belt alignment switches. These switches were to be changed,

arising out of the direction given at the August 31 site meeting.

The minutes of the site meeting of September 7 record sample

belt alignment switches being turned over to FCC. These switches

serve a safety function relating to the belt conveyors. The

minutes record that the earliest delivery for the north annex bin

bottom gates I/O rack was September 11, and that the trackshed

panel would not arrive on site for a week. The minutes also

record a target of moving grain on September 25.

- 92 -

210.

On September 21 Derhouson confirmed that FCC would undertake

modifications to C5 and C9 as shown on drawings issued on

September 19 on a time and material basis with "completion by

October 20/89". This fax was formally incorporated into Change

Order 119.

211.

Van Dyke testified that he would not have ordered the C5 and

C9 work if he thought it would take longer than October 23

because that was FCC's then scheduled date for completion of the

work. This estimated completion date was consistent with Van

Dyke's own estimate in his report to MacKay.

212.

This illustrates one of the critical issues in assessing the

delay allegations. To the extent that any FCC acts or omissions

had caused the completion to be delayed to October 23 at the time

UGG ordered the C5 and C9 work, then clearly the ordering of that

work did not cause that period of project delay. Even if other

UGG or CWMM acts or omissions had already caused project delay to

October 23, then the fact that this specific item was carried out

when it was does not necessarily mean it was a cause of delay.

For FCC's case, it was only such if it, standing alone, caused

substantial performance to be achieved later than it otherwise

would have been. Van Dyke's evidence indicates that he was alive

to this issue at the time and that is why he says he would not

have ordered the work if he thought it would take longer than

FCC's then scheduled substantial completion date.

- 93 -

213.

214.

215.

CMI read in portions of Whitaker's discovery evidence at

trial as follows:

A.

Probably one of the most obvious examples [of late

design information] would be the spouting and conveyor

layout in the north and south annexes.

...

Q.

A.

How did that impact upon the activities of FCC?

It meant that shop drawings for conveyor supports

could not proceed and shop drawings and

fabrication of the spouting could not proceed."

As the Project proceeded, Whitaker prepared an analysis of

the drawing revisions that had occurred. In his evidence at

discovery he stated:

Q.

A.

Now as a result of the review that you conducted

of the drawings, Mr. Whitaker, did you reach any

conclusions with respect to the changes in those

drawings?

There was an unusually large number of drawings

issued late or revised late.

Whitaker gave further discovery evidence relating to certain

of the mechanical drawings as follows:

Q.

A.

When you say "lateness", what do you mean by that?

Well, an example is on the third page, drawings

5325, M-201 to M-205, these are spouting detail

drawings, revised on the 30th of May, 1989.

I'm sorry, where are you?

The third page. Given that shop drawings have to

be prepared by the spouting fabricator, reviewed

by the engineer, the spouting pieces fabricated

and installed, in my view May the 30th is too late

for a project that was to be completed by the end

of August.

Q.

A.

On the next page, drawing 5325, M-401 was revised

on October 26, 1989. This was after the intended

completion date for the project. There are

- 94 -

several other drawings which were revised in

October...

216.

Steel testified to the length and effect of the delay in

receiving the final support details for the basement conveyors.

He stated that he requested the details on June 8 and that they

were not finally received until 18 days later:

Q

A

Now, what difficulty was that causing you as of

June 8th?

Will, it's pretty obvious once against without the

support details for conveyors you're not going to

hang the conveyors and if you can't get the

conveyors up Crosstown is not going to be able to

get on with their field measurements and do the

spouting and ducting.

Q

And how long did it take to get an answer to that

particular request? You might refer to Mr.

Whitaker's summary for a quick answer to

that.

A

Q

A

Okay. Are you insinuating that I'm slow?

No.

Well, there was -- do you want the number of days

or

--

Q

A

Q

A

Q

Yes. Did you get the answer in one lump?

No, we didn't. We got it piecemeal.

Okay. And how long did it take?

Total duration looks like 18 days to me.

Do you recall having any discussions with anyone

from CWMM or UGG as to either why these were late

the time or with respect to what problems you were

having with these or was it simply done by memo?

Oh, I think, you know, in all fairness we did

speak to Bob on the site and we were advised that

they were going to make some changes to the

at

or

A

conveyors in the base. They were going to switch

from screw conveyors I believe to drag conveyors

something of this nature so they were going to

re-design it.

Q

Did this work put Crosstown behind at all, do you

know?

Well, sure.

A

- 95 -

217.

Steel gave the following evidence of the effect of FIR 98 on

CMI:

Q

A

Would you refer to FIR number 98 please. That's

regarding a gate interfering with a leg. Would

you explain what information you required and why

just in your own words?

I believe that this is a gate that actually is

going to be installed by Crosstown in their

operation, and it was going to interfere with one of

the legs on the scale floor.

Q

A

Q

A

Q

A

Q

Okay so what you were looking for?

Some instruction as to what we should do about it.

Okay. The memo is June 28, correct?

Yes.

When did you get a response?

July the 7th.

Okay. Do you know why it took nine days to

respond?

A

No, I have no idea but I can tell you this, that

it certainly stopped Crosstown from carrying

on with

that work and they couldn't afford to stop.

Now, why do you say that they couldn't afford to

stop?

Well, now that the equipment is finally come and

we have a -- a good supply of tradesmen to

it we were putting the stuff in fast and

and* just and they had a lot of work to

all of a sudden this equipment was here

Q

A

install

fewer rust

do now that

and being

installed. Now it was up to them and the

electricians and the control people to

this job. So you know, they didn't need

that's for sure or any hold-ups.

complete

any stops

218.

Notter complained that CWMM continuously changed the design

of the Buhler equipment, often in an incomplete way, and were

slow at returning shop drawings, but recognized no schedule

impacts as a result. At a May 3 meeting with CWMM, Notter said

"Stop changing and then we can finalize and say that's the final

delivery".

- 96 -

219.

In my view, the evidence demonstrates that the number of

drawings prepared by CWMM during the course of the project and

the timing of their delivery to the contractors delayed them in

the prosecution of their work. A contractor on a lump sum

project is entitled to expect that the project design has been

substantially completed at the time of tender. While a certain

number of changes are to be expected during the course of a refit

project such as this, the number of drawing revisions and the

delay in providing these to the contractors caused FCC to attain

substantial performance after August 31 and it delayed CMI in its

work.

(iv) DOCK PROGRESSORS

220.

On March 17 UGG confirmed by letter that it had "asked the

Vancouver Port Corporation to upgrade the jetty at the terminal

as part of construction works that VPC is undertaking to repair

the jetty". At the time MacKay knew that if the upgrade contract

was awarded it would be awarded to JJM, a non-union contractor.

The letter also said:

"We [UGG] understand that VPC can proceed to award the

contract for construction of the repair and upgrade

project based on UGG's agreement and consent to the

matters referred to in this letter."

221.

UGG also confirmed its agreement that construction of the

west berth could carry forward to September 15 and construction

of the east berth could carry forward to November 15.

- 97 -

222.

The site minutes of April 25 record at item 10.007:

"10.007

It is to be noted that all FCC related

personnel are totally off the dock area.

CWMM asked FCC to advise of the latest date

they require to complete their work in this

area.

A - FCC ask that it be recorded that any delay or

interruption in this area has an adverse

affect on their completion.

B - It is to be noted that there is certain

electrical work to be done at the north end

of the dock.

C - FCC request a copy of the dock work

plans/specifications and schedule."

223.

On May 15 Bomback sent a fax to Campbell requesting

instructions with respect to the Concise equipment. On the same

day Campbell provided information to Marquis about the

availability of the dock for installation of the dock

progressors. The dock progressors could not be installed on the

date suggested by Campbell because the dock did not become

available.

224.

The site minutes of May 16 recorded under item 13.001:

"13.001

The potential problem of non-union versus

union for dock installation was raised.

A)

The area for secondary

progressors will be available

to FCC July 3, 1989.

- 98 -

B)

C)

Electrical I.O. Loops should

now be postponed until after

dock work is complete.

Concerns regarding

demarcations of north end

boundary were discussed and it

is hoped that as the dock work

progresses, the installation

of progressors, etc., will

follow the dates as those

areas are turned over."

225.

226.

The dock progressor work was not completed until November.

The site meeting minutes of June 8 record that FCC advised

UGG and CWMM that the dock progressor work should "begin July

17/89 to meet the completion date". Additionally, the meeting

notes record "FCC advised that they will prepare a schedule

update for next week based on the advice of earlier delivery

dates for all BM conveyor components".

227.

228.

The Whitaker schedule turned over by FCC at the June 15 site

meeting was subject to:

E)

That we are able to begin work on the dock

progressors and north end loop on or before July

17, 1989.

In MacKay's June 20 report to the UGG Board of Directors he

noted that the secondary car progressors on the dock would "not

be installed until July when JJM is finished working on this area

of the dock". MacKay also noted that discussions with the union

with respect to reducing staff were going very slowly. The

- 99 -

report also notes that the west berth was scheduled to be

completed by September 15 and the east berth by November 15.

229.

230.

On June 22 at a meeting after the site meeting, Skodje

advised that FCC wanted to withdraw from the dock work concerning

the two dock progressors because of union problems caused by

JJM's dock upgrade work.

On July 5 Rhodes forwarded to Campbell the documentation

reflecting the walkout on site, indicating that on Thursday, June

29 most tradesmen on the Project decided to exercise their non-

affiliation clauses not to work alongside non-union workers on

the dock and walked off the job. They did not return to work

until late in the day on July 4.

231.

Van Dyke's notes of the meeting following the site meeting

on July 6 indicate "CWMM put together new contract for FCC with

C.O. for deletion of [the dock] progressors".

On July 7 Mr. Skodje wrote to Campbell stating as follows:

"In accordance with the requirements of Item 6, Page 2

- 6, Section 2, "Form of Tender" and "GC4 Delays", page

11, Section 3, "Contractor Agreement Between Owner and

Contractor" we notify you of the possibility of a claim

due to labour disruptions which commenced on site

approximately June 30, 1989."

232.

Both CWMM and UGG knew at this time that FCC had been

delayed by the labour disruption on site. JJM was working on the

dock upgrade contract (consented to and approved by UGG) and FCC

- 100 -

employees exercised their non-affiliation rights and refused to

work alongside non-union employees.

233.

On July 13 Campbell sent a fax to Atwell requesting the

official cancellation of the change order deleting the dock

progressors from the Prime Contract. Van Dyke cancelled the

change order. This cancellation was not done at FCC's request

and had the effect of adding the two progressors back into the

work under the Prime Contract.

234.

235.

On July 14 there was a meeting respecting the dock work

attended by representatives of VPC, JJM, CWMM, UGG and Acres, but

not by FCC. At that meeting Tuttle of VPC said "can't guarantee

allowing FCC to work on dock unless he gets time extension".

The minutes of the site meeting of August 24 record that FCC

had completed all work for the progressors on the dock to the

extent possible in the previous weekend, and that UGG had

expressed their concern regarding the schedule and completion

with all parties to continue maximum efforts to meet deadlines.

236.

In his August 24 letter to Pope, Campbell projected

electrical control, instrumentation work into November not

including "an apparent impasse with respect to completing work on

the dock progressors". The August 24 site minutes also record

FCC being requested to proceed with the progressor installation

on the docks Wednesday, November 1 as UGG advised JJM would be

- 101 -

off the dock. Ricketts-Sewell stated that the fire alarm would

be operational by the following Monday.

237.

After November 1 the minutes of the site meetings were

prepared by Hawkins. The minutes of the site meeting of November

2 record that all sampling systems had been checked out, while

the three panels added by the CGC were still coming there were

further requirements of the CGC, the additional belt alignment

switches had been completed, and FCC would begin the preparatory

work the next day for the installation of the dock progressors

"assuming that JJM will be off the upper deck".

238.

On December 6 MacKay and Van Dyke met with Smith and

Birkland of the VPC. They were advised that by Christmas the

west berth could be done, but that the east berth may take an

additional four to five months. The VPC explained they had no

problem terminating JJM's contract since there was a standard

termination clause in the contract. It was then suggested or

decided that the work on the east berth would be delayed until

the dredging for the east berth could be done, so that one berth

would be lost only once for six months instead of for twelve

months. MacKay's notes record "UGG should also mention that hold

off east berth - get JJM off berth therefore not a problem with

non-union/union shop. We have concern over working relationship

- longshore - grain handlers - etc.". MacKay explained in

evidence that this was a reference to the fact that no one knew

- 102 -

whether or not the Grainworkers Union or the Longshoremens' Union

would work while JJM was on the dock. The best thing to do,

according to MacKay, would be to get JJM off the dock before

doing any shipping.

239.

FCC was delayed in installing the dock progressors because

its union work force refused to work at a common site with JJM's

non-union forces. It is clear that FCC was unable to install the

two progressors on the dock until JJM's work was completed and

they were off the dock. However Van Dyke testified that the dock

work was delayed or at least it was not completed earlier because

FCC was already late in completing its work under the contract.

He says UGG could have had the dock work completed earlier. I

accept that evidence and conclude that while the dock may have

delayed FCC, such delay was concurrent to the delay already

caused.

(v) VOLUME OF CHANGE ORDERS OR EXTRA WORK

240.

As outlined in the "FCC EXTRAS" section, the parties elected

not to follow the provisions of GC 11 and 12 in the prime

contract respecting extra work. These stipulated that upon the

ordering of extra work, the contractor was to advise in the event

that the extra would result in an extension of the contract time.

If so, the owner would then have the option to proceed with the

extra or cancel it and have it done later or by another

- 103 -

contractor. FCC says that because the contract provisions were

mutually waived, it did not have to so notify UGG. UGG contends

it was entitled to order extra work and to be advised by FCC if

such extras would delay substantial performance. UGG says that

if the extra was going to delay the completion, it wanted the

option of cancelling the work or having it done later or by

another contractor. At no time on this project did FCC ever

advise that ordered extra work was going to delay substantial

performance.

241.

242.

On March 20 Campbell forwarded proposed change order

material to Marquis, which did not comply with GC 11 and GC 12 of

the Prime Contract. This type of material was used during the

balance of the Project.

The April 18 site minutes note that information had been

received with respect to the brackets required to hang the Bisco

drag conveyors. The minutes also note that there were still four

drawings on hold. FCC requested a "CCN (Contemplated Change

Notice) for the change in conveyor length because of the impact

it would have on other trades for new gates, pneumatics,

controls, etc".

243.

At the April 18 site meeting FCC produced sketches for

consideration for the conveyor hangers that had been put on hold

by Campbell on April 7. A change was also requested to be

- 104 -

confirmed by CWMM for the addendum to the Hansen Letter of Intent

that was missing from the tender package.

244.

On August 8 Campbell sent a fax to the CWMM site

representatives with respect to metering gates for six gates.

This work was to allow UGG to control the extent to which the

gates opened, rather than having the gates in a fully open or a

fully closed position as the only alternatives. This requirement

was first noted on July 31.

245.

On August 9 CWMM issued memo 300 directing the metering work

on the six gates to proceed on a time and material basis. FCC

says that when work was directed on a time and material basis

Campbell intended that FCC would have a reasonable time within

which to complete the work. At no time did CWMM say to FCC that

FCC took an unreasonable period of time to complete this work.

However a reasonable time to complete the work is not the same

thing as an agreement to extend the contract time.

246.

FCC's response to this memo is as close as FCC ever came to

giving specific notice of extra-caused delay. Marquis wrote on

the memo "we will review and advise as to any effect on the

schedule". No further advice was given to CWMM or UGG. On

August 15 FCC advised CWMM that this extra could not be completed

for at least four weeks due to equipment deliveries. Van Dyke

acknowledged in evidence that from subsequent site meetings and

- 105 -

copies of documents from CWMM, UGG had the same information on

delivery of the valves as did CWMM and FCC.

247.

This illustrates the difficulty with assessing the impact of

the extras. FCC told CWMM August 15 that the extra would take at

least 4 weeks, well past the August 31 completion date. However

by August 15 it was clear that substantial performance was not

going to be achieved by August 31. Hence telling CWMM August 15

that the extra work would take at least 4 weeks was not a

communication that the extra would cause a delay in substantial

performance.

248.

Also on August 10 CWMM discovered that many of the motors on

site did not have thermistors. This led to an extra directed on

a time and materials basis to FCC to install thermistors in the

motors. Several motors, weighing 5-600 pounds each had already

been installed and needed to be removed. Van Dyke initially

understood the thermistors were an insurance requirement for

operation of the plant.

249.

The site minutes of August 17 record that the schedule could

not be maintained with the additional work without overtime. FCC

was targeting the first week of September to remove the overhead

crane. Hammond advised that they had received the first modicon

control card and Ricketts-Sewell advised that the I/O rack for

the basement gate extra would not arrive on site until September

- 106 -

"after which it will take 3 weeks to complete the installation".

Ricketts-Sewell also advised that "the South Annex will follow".

All parties were apprised of the delay problems with respect to

the basement gates extra at this meeting.

250.

On August 21 Van Dyke and Campbell discussed Van Dyke's

feeling that FCC would not complete until December 1. They

discussed whether the Celtek extra could be done outside the

Prime Contract without affecting it. They discussed the

number of man-hours they thought FCC had worked on the Project

(based upon a conservative estimate provided by Atwell) compared

to the number of man-hours they thought UGG was entitled to based

on their interpretation of page 2-5 of the Prime Contract. Van

Dyke also noted the dock delay as well. In his notes dated August

22 Van Dyke recorded a conversation with Campbell regarding

thermistors "were they not spec'd, what happened?". On August 23

Campbell sent a fax to Weingand with further solenoid

clarifications advising Weingand "this is not the end".

251.

On August 24 Weingand advised Koga of Ricketts-Sewell of

significant changes to the basement gate work caused by Modicon's

inability to deliver 32 bit cards and a change to 16 bit cards.

This work was eventually done on a time and materials basis under

a change order.

252.

On August 26 Campbell sent a fax to Van Dyke advising that

the C5-C9 drawings would be finished by the end of August. The

- 107 -

drawings related to a change to conveyor C5-C9 which eventually

lead to a change order.

253.

On August 28 Somogyi sent a fax to the site office with the

additional work required with respect to the manifold diverter

valves. The largest part of this additional work was to supply

solenoids for all double valves. The time estimate for delivery

was four weeks after receipt of order. These solenoids were

necessary because the default position of the solenoids was the

closed position. In case of a power failure, if both gates on a

double valve gate were to close they would damage the gates. It

was therefore necessary to add solenoids to each of the double

valve gates. This work was required before substantial

performance of the Work could be achieved.

254.

At the end of the site meeting on August 31 Marquis handed

out three pages of the FCC's concerns. These concerns

transmitted to all at the meeting, included many extras which

were causing delays, many questions which needed to be answered

in order to finalize the project, and noted:

"Additional work - both RS and CMI have problems doing

within current schedule & need to do on overtime

basis...both CMI & RS should be authorized to work

overtime on contract work."

255.

Subsequently, Hammond did from time to time authorize

Ricketts-Sewell to work overtime on original Contract Price work

- 108 -

and on Change Order work. No such authorization was forthcoming

from Campbell for CMI or FCC. However while FCC advised the

extras were causing delays, it at no time gave notice of time

extension.

256.

On September 13 Weingand sent a fax to Atwell regarding

changes to the basement gates. A memo was sent to FCC directing

that the further changes take place stating "these changes have

been discussed with your electrical subcontractor and do not

represent a delay to the work". Marquis crossed out the words

"and do not represent a delay to the work" and returned the memo

to CWMM because any additional work at that stage of the game

would have delayed the Work. What Marquis did not do was to

advise that the extra would cause substantial performance to be

delayed and request a time extension to the contract. If extra

work was going to delay substantial performance the contract

required FCC to notify UGG if it wanted a time extension.

Although the parties waived the contractual formalities for

ordering extra work, I conclude that the requirement that the

contractor provide notice if an ordered extra was going to delay

substantial performance was never so waived.

257.

On September 21 Derhouson confirmed that FCC would undertake

modifications to C5 and C9 as shown on drawings issued on

September 19 on a time and material basis with "completion by

- 109 -

October 20/89". This fax was formally incorporated into Change

Order 119.

258.

On September 27 Marquis advised Campbell of the extent of

the additional work for the diverter gates. Hammond noted on the

memo that the terminations should all be finished by October 13.

This was extra work. On the same day Weingand noted the final

layouts were sent for the receiving and shipping panels for the

Canadian Grain Commission to meet their requirements.

259.

260.

On October 19 Van Dyke authorized Hammond to direct

Ricketts-Sewell to continue with overtime on terminal lighting

and repairs to motor control centre 12A, to ensure that lights

and fire sensors were in place for start up.

On October 30 Campbell directed Bisco to install chain

casings for conveyors B1 and B2 and UGG issued a purchase order

November 1. These chain casings were required before conveyors

B1 and B2 could operate at production capacity. The purchase

order to BISCO was not a Change Order to the Prime Contract.

261.

On November 7 Weingand developed a lengthy list of further

Modbus II parts which were required. The parts were ordered

under a change order to the Prime Contract and were installed

between Nov 13 and Nov 18. The Modbus II was required to operate

the PLC.

- 110 -

262.

On November 14 Weingand recorded a telephone conversation

with Van Dyke regarding a change order to the Western Scale

delivery which would be handled as a new purchase order directly

between UGG and Western Scale. The equipment ordered was

required for the communication between the scale computers (in

the old control room) and the terminals, printers etc. (in the

administration building), and for the direct scale to Modicon

communication.

263.

The minutes of the site meeting of December 14 note that

scale 1 was to be certified on that day, Ricketts-Sewell would

finish the extra work in the scale 3 area the next day and were

waiting "testing by HA", a partial deficiency list had been

received on Tuesday, and security was to become UGG's

responsibility starting Sunday at midnight, December 17. The

minutes also note that CWMM advised "UGG to take over lock-out of

MCC's after Friday, December 15, 1989".

264.

One difficulty in assessing the impact of the extras on

substantial performance is that FCC never advised CWMM or UGG

that a specific extra, if carried out, would result in a

corresponding project delay. If the ordered extras were going to

delay FCC, I would have expected it to have notified CWMM and /or

UGG. In addition, most of the extras were ordered later in the

project. For these reasons I am unable to conclude that FCC has

established that the ordered extras delayed it in its work beyond

- 111 -

the delays caused by the factors to which I have already

referred.

(vi) COMPUTER PROGRAMMING

265.

On June 5 Hammond transmitted drawings to Western Systems,

including the drawings for the PLC I/O module and closure

layouts. Weingand said in his accompanying note with respect to

the changes that were made "I hope this hasn't caused too much

extra work or confusion".

266.

On July 24 Weingand of Hammond sent a fax to Western Systems

with a copy to Koga of Ricketts-Sewell dealing with inter alia

delivery of modules and enclosures for the Basement Gate extra.

In the fax he said:

"We understand that the B806 modules are long delivery.

Please do not delay delivery of these enclosures

because you don't have these modules. If delivery of

enclosures is delayed it will set the whole job behind,

therefore modules will have to be installed on site."

267.

268.

This fax was not sent to FCC.

On July 31 Campbell sent a fax to Weingand stating, inter

alia:

"3. SVG 05, 02, 11, 12 and SVS01 all require

metering gates.

4. Any control philosophy info ? for me".

- 112 -

269.

The site minutes of August 17 record Hammond advising that

they had received the first modicon control card and Ricketts-

Sewell advising that the I/O rack for the basement gate extra

would not arrive on site until September "after which it will

take 3 weeks to complete the installation". Ricketts-Sewell also

advised that "the South Annex will follow".

270.

On September 12 representatives of UGG met with

representatives of CWMM to discuss the electrical and engineering

status. Van Dyke's notes record that Campbell had a "concern re

control philosophy. No control devices yet installed. Need

realistic indication of where [at]". He also noted that a report

was needed with respect to "dock time completion". Van Dyke's

notes make it clear that there were many outstanding electrical

and engineering items, including those relating to the Canadian

Grain Commission, the PLC and computer programming, and the

preparation of an operations manual and control philosophy which

were slated to be ready by September 21. Also, in response to

the question "when R & S complete" it was noted "maybe end of

October to run grain - still need more time to get into

production". Hammond gave evidence that at no time did he think

Ricketts-Sewell was not diligently prosecuting its portion of the

work under the contract.

271.

The minutes of the site meeting on September 14 record a

further three weeks for the installation of the thermistors with

- 113 -

CSA approval required when installed, actual delivery of the

north annex bin bottom gates I/O racks for September 13 with the

south annex racks perhaps coming Tuesday or Wednesday of the

following week, and that the trackshed panel would arrive on site

on that day but probably would not be installed until October 9.

272.

On September 15 Van Dyke prepared a detailed report on all

areas of the Terminal for MacKay. According to Van Dyke's notes

he did not estimate the completion of any of the mechanical

installations to take longer than three to four weeks. However,

he did advise MacKay that he could not see the west berth being

finished until November or December, that the new engine would

likely not arrive until mid October and that electrical

completion was scheduled for the end of October. He also noted

that with respect to the north and south annex basements that

very little work had been done on the bin gate opening system and

that Van Dyke was "unsure of the status of equipment at this

time".

273.

274.

On September 18 Campbell sent a fax to Hammond re changes to

the gate opener cab that had to be completed before the gate

opener would accept the panel that was to be installed in it.

The gate opener needed the panel in order to operate.

The site minutes of October 5 record that installation of

thermistors would take place in the next week, the progressor

- 114 -

cylinders would be sent out for check out, the wiring for the

north annex basement gates would be complete on October 5, the

tie-in and termination of plant systems into the administration

building was targeted for October 16, the PLC terminations would

be completed in the north annex, the work in the south annex was

targeted for completion by October 23, and Ricketts-Sewell was

experiencing problems with the lighting circuits.

275.

On October 17 Hammond sent a fax to Campbell with a copy to

Van Dyke suggesting that the proposed grain run for October 18 be

cancelled. The reasons Hammond gave were as follows:

"(a)(2)1. The fire alarm system is not fully

operational. There are 2 major splices to be

made where conduit was removed to clear

spouting. Once repaired (later this week

apparently) the system must be tested by

Systematic along with the annunciator in the

panel room. I suspect that running grain

without adequate fire protection would have

dire insurance consequences.

2.

The workhouse would become "hot" after

the run. It appears there is at least 3

eeks worth of concentrated hot work

still to be done.

3.

4.

Electrical rooms must be sealed and

pressurized. Also all open electrical

boxes and equipment must be sealed.

For process purposes, the proposed grain

run has no commissioning benefit. The

equipment sequencing can not be checked

until entire systems are available. My

first choice would be to have systems

dry-run under control from the PLC once

all wiring checks are done. After this,

- 115 -

grain can be run to observe performance

under load."

276.

The fire alarm reference was a reference to a Change Order.

The hot work in the workhouse was a reference, as the meeting

minutes of October 12 recorded, to primarily Change Orders rather

than originally tendered contract work. The reference to

"process purposes" was a reference to the fact that because the

PLC was not fully programmed to run from the computer there was

no commissioning benefit as far as Hammond was concerned.

277.

On October 19 the site minutes record that the thermistor

extra would be completed in the next week and north annex testing

had caused Hammond some problems but should be sorted out by the

next week. It was also reported that the tie-in to the

administration building should start in a few days and would take

three days, but that CWMM had not yet heard of the date of

deliveries of the revised grain commission panels. Hammond

advised that minimum requirements were not yet completed prior to

running grain and that he would prepare a list for review, would

identify minimum lighting required and repiping prior to a grain

run, and that it was targeted to run the sampling systems with

the PLC on Monday, October 23. The minutes also record that

additional belt alignment switches were now required and that

there were tolerance problems with the wipers for the Nord-Sen

gates.

- 116 -

278.

279.

On October 19 Van Dyke authorized Hammond to direct

Ricketts-Sewell to continue with overtime on terminal lighting

and repairs to motor control centre 12A, to ensure that lights

and fire sensors were in place for start up.

At a meeting of October 23, FCC confirmed that A - K in the

start up memo had been done, the exceptions being "F" and "I".

"F" was an exception relating to belt alignment switches and it

was confirmed at the meeting that the belt alignment switches

could be installed before or after grain flow. The only

outstanding item for start up in accordance with Hammond's memo,

as of October 23 were opening and closing the gates, some of

which were still being rewired with new solenoids.

280.

The minutes of the site meeting of October 26 record that

the thermistors were inspected and that in respect of testing,

cleaner deck and basements were complete, north annex drags and

gates would be done the next day, and the remaining workhouse

would be done by the following Monday. The minutes also record

lighting requirements for the grain run being identified on an

ongoing basis, and that the three panels added by the Canadian

Grain Commission would arrive in 2 weeks. The minutes also

record "upon the comment that substantial completion of the main

contract be established, it was suggested that this would happen

after grain was introduced. Further review will be made".

- 117 -

281.

Van Dyke's notes of the October 26 meeting record that when

Marquis asked Skodje to call for substantial completion, Skodje

said "we haven't done our work until grain runs through the

system. Feel done by Friday then ask for substantial completion.

Workhouse "'hot' by next week". This was a reference to FCC's

view that once the workhouse was hot and some grain had been run

FCC would have substantially performed its obligations under the

Prime Contract.

282.

After November 1 the minutes of the site meetings were

prepared by Hawkins. The minutes of the site meeting of November

2 record that all sampling systems have been checked out, while

the three panels added by the CGC were still coming there were

further requirements of the CGC and the additional belt alignment

switches had been completed. Item 37.001 records:

"37.001

Continuation of item 32.004 - Testing:

HA gave verbal report of

current checkouts

-

Wheat reclaim done

Legs all complete except 10 & 28

All drag conveyor have been bumped

Distributors are ready

All gates on cleaner deck have been adjusted

Adjustment required on gate limit switches

Encountering some wiring problems for the

dust control systems."

283.

On November 14 Weingand recorded a telephone conversation

with Van Dyke regarding a change order to the Western Scale

- 118 -

delivery which would be handled as a new purchase order directly

between UGG and Western Scale. The equipment ordered was

required for the communication between the scale computers (in

the old control room) and the terminals, printers etc. (in the

administration building), and for the direct scale to Modicon

communication.

284.

285.

On November 20 Weingand made a further list of missing I/O

modules related to the Modicon supply.

On December 11 Van Dyke took notes at a meeting with MacKay.

Van Dyke's notes state, inter alia, "Gerry Moore asking what's

going on - directors want to know...MM - find out 'where at' and

'when' done - wants to unload cars on Wed if scales certified by

Tues - wants day shift crew in place and in position to run

grain". The also notes indicate that Van Dyke "expressed concern

re: 'starting up too soon' and not being under PLC control -

trying to operate manually will cause too many problems and slow

down the total automatic process from coming into effect". The

note ends with MacKay requesting a meeting with Hammond,

Campbell, Graham and Van Dyke to "see where programming is at".

286.

On December 20 Campbell, Van Dyke, Hammond, Pope, Graham and

MacKay met to discuss programming. Hammond advised of the items

that were still outstanding including the following comment with

respect to the shipping system, "programming is done - will

- 119 -

commence working on this area Jan 2, 1990 - right now we can run

belts and open bins - we have to verify all the bins are

operationally functional and we have to meter the gates - we have

to check and certify the scales - then have to check from scale

to vessel".

287.

On December 21 Van Dyke's notes record "ship scales and 3

shipper - not yet certified", "Need written Operational &

Procedure manuals info on inter-locks - fire alarms systems -

etc.", "Shipping: problems re: metering new gates - may be

potential future problems....", "UGG - perhaps open/close

basement gates on MT bins and when running" and "Damage to

hydraulic power pak by JJM - lights etc."

On December 21 Van Dyke made a note entitled "discussion with

PJC". In the note Van Dyke says:

"Deficiencies for substantial completion.

1.

Basement gates have not yet been tested and

shipments under auto control cannot be made.

(consultant still to check performance

parameters)".

288.

At trial Van Dyke said that this would not be a deficiency

for substantial completion, although he thought that it was in

December, 1989.

- 120 -

289.

On February 1, 1990 UGG shipped grain for the first time

since 1989. The shipment was from the west berth. In respect of

the shipment Pope told Wilson of the Vancouver Province that

"United Grain Growers shut down its elevator in March, 1989

expecting a five month closure. But the conversion to

centralized computer control was much longer".

290.

On March 13, 1990 MacKay forwarded his quarterly report to

the Board of Directors. He advised inter alia:

"The UGG Vancouver terminal starting unloading cars the

week of December 18...the handling agreement with SWP

ceased as of December 1 (excluding canola)"....During

January and February the terminal staff were kept busy

getting the 2 receiving scales, 2 shipping scales and

the truck loading scale approved by the Canadian Grain

Commission. The 2 shipping scales and 2 receiving

scales had been approved, but the CGC has some concerns

about the bulk weigh receiver scale. UGG and Western

Scale spent a lot of time during January and February

working on the bulk weigher in order to erase the

concerns of the CGC weighing staff. As in most new

systems one must learn how to walk before you run and

this project is no different. The employees are

learning the new system and at the same time we are

debugging the computer program which runs the terminal

operations. This is an ongoing process and can be very

frustrating for all concerned - management, employees,

engineers, and directors. There has been some

improvement and it is encouraging to see some

consistency developing as of the end of February".

291.

Because the programming delays occurred relatively late in

the project I cannot conclude that these events delayed

substantial performance longer than it had already been delayed

by other events earlier in time. So to the extent that computer

- 121 -

programming delayed substantial completion, I find that those

delays were concurrent.

DELAY ALLEGATIONS - CMI

(a) INTRODUCTION

292.

I now turn to the factors said by CMI to have delayed it in

its work under the subcontract with FCC. Many of these factors

such as drawing delays echo FCC allegations. Other factors such

as equipment delays contain allegations at least in part directed

at acts or omissions of FCC as well as UGG and CWMM. Finally,

CMI's allegations with respect to demolition delays and the IECO

gates are directed solely at FCC.

293.

Most of CMI's work on this project consisted of spouting

that was to be connected to equipment that was in fact delayed.

Since CMI's spouting could not be connected to this equipment

until after the equipment had been installed in its final

location, delays to the delivery and installation of equipment

became delays to CMI.

294.

CMI summarizes its delay case with reference to the

installation of the south annex drag conveyors. It points out

that no critical path analysis was undertaken by the parties to

this litigation to enable a detailed analysis to be made as to

why the project schedule was not achieved. However, it says the

critical path of its work was extremely simple. It involved one

- 122 -

final "milestone" and one "work item", namely: the South Annex

drag conveyors. Relying on Rhodes October 18 Daily Report which

is the first reference to CMI installation work in the south

annex, CMI says the last South Annex drag conveyors were made

available to CMI for installation of spouting on or shortly

before that date. CMI substantially completed its work on the

South Annex spouts - and the project - by the end of November:

somewhat more than one month later. CMI says if the six week

period it took to install the south annex spouting is reasonable,

then whatever may have happened in other areas of the plant, it

could not have completed its work before November, 1989.

295.

In its March 27 Schedule, CMI planned to begin the south

annex spouting on April 24, and complete it by July 10. The bin

floor spouting in the north and south annexes was a significant

work item. It represented 30% of CMI's originally tendered scope

of work.

296.

Some other factors that delayed CMI were canvassed with

Marquis in cross-examination. He agreed that:

(a) the demolition work had been delayed, and CMI's work

had to follow completion of the demolition work;

(b) holds had been placed on the design drawings throughout

the period March - June 1989;

- 123 -

(c) there had been delays in the delivery of the IECO gates

to which CMI spouting had to be connected and the

installation of IECO gates was essential to CMI's

performance of its contract;

(d) CMI had difficulties in both the basement and cleaner

decks as a result of interferences;

(e) CMI had not been able to field measure because of a

number of factors, and he agreed that FCC supported CMI

on this issue;

(f) there had been late delivery of some of the pre-

selected vendors' equipment;

(g) when the drag conveyors were delivered there had been

tolerance problems with the gates attached to them;

(h) CMI had been asked to work substantial overtime from

July 26 to October 12 to accomplish extra work and to

maintain the "contract schedule".

297. Of all the witnesses at the trial, other than CMI's witnesses,

Steel had the most frequent and direct contact with CMI's effort

and progress on a daily basis. He testified that CMI was delayed

from the beginning by factors beyond its control in many areas of

- 124 -

the project. I further take from his evidence that in his

opinion CMI took reasonable steps in mitigation.

298.

He responded as follows with respect to the April 5 Daily

Report:

Q

Would you refer to your daily job report for April

5th, please. And would you describe where

Crosstown was in its work?

A

Well, my note to myself here is Crosstown

materials are starting to roll in now.

Q

A

That's halfway down the page?

Yes. And they will be increasing the installation

crews next week.

Q

A

Okay. Was it your perception as of April 5th that

Crosstown was holding up the work?

No. Not -- not for the equipment they had, no,

certainly not.

299.

When asked about the May 2 site meeting item 11.014 he said:

Q

A

Okay. Do you recall anyone from Crosstown stating

that Crosstown was being held up in some areas?

Well, there was more than some areas, John. I

mean obviously without gates, without conveyors

there is all kinds of areas that are being held

up.

Q

A

But can you recall anybody saying that at the

meeting?

Yes. It was brought out when this was -- when

this was thrown out at the minutes we and

also stated they were being held up in

Crosstown

areas --

Q

A

You can recall that specifically?

Yes, I do, yeah.

300.

301.

Popowich noted on his copy of the minutes that 11 gates

arrived the next day, May 3.

Regarding the May 4 Daily Report Steel said:

Q

Look at the last paragraph. It says:

- 125 -

"Meeting held with Crosstown today. They will

be crewing up next week. Problem with the turn

head drive motor relocation has apparently been

sorted out by CWMM today. This equipment will now

be approximately three weeks behind schedule in

arriving."

Let's start from the beginning with the notation

about "Crosstown crewing up next week". Why was

Crosstown going to be crewing up next week?

Well, with the arrival of -- anticipated arrival

of the turn heads and various equipment they are

anxious to put people on the site and get on with

their work.

A

302.

Referring to the May 10 Daily Report Steel said:

Q

At that time, May 10th, was Crosstown behind in

its spouting given the equipment that had arrived?

In the cleaner deck or on the entire site?

Let's start with the cleaner deck?

A

Q

A

Q

A

No. Not in my opinion they weren't, no.

What about the entire site?

No. Every time a piece of equipment came in on

that site they were on it. I mean as soon as we

as soon as we got it installed or hung or whatever

we had to do to it.

--

303.

Referring to the May 25 Daily Report he said:

Q

Okay. Now, as of that date May 25, do you recall

whether you felt that Crosstown was still able to

keep up with the incoming equipment? Well, yeah,

they were doing fine at that particular time. As

I think earlier we already said said that they

were increasing by five and by five and so we all

felt we were on top of what was happening.

304.

In chief referring to the July 12 Daily Report Steel said:

Q

Would you refer to your July 12th daily report,

please. Starting with the first paragraph, do you

see that?

A

Q

Yes.

It is says, "after several meetings with Crosstown

with us expressing our concerns as their ability

to maintain the schedule, they have now decided to

- 126 -

work the crews 11 hour days. This will help but

we

definitely need to have a second shift. They have

promised to address the problem."

Can you remember having several meetings with

Crosstown and expressing concerns as to

Crosstown's ability to maintain the schedule?

A

Q

Yes, I do.

Can you remember anything about who said what at

those meetings?

A

Yes, I can. This is, you know, this trade as I've

mentioned before has been pushed into the critical

path on this job. He is now performing work that

he should have done a long time ago. As we talked

about earlier if we had of got support steel four

or five or drawings cleared for support steel four

or five weeks earlier and had we got conveyors

four or five weeks earlier, we would have finished

the installation four or five weeks earlier, so

hence Crosstown would have been on these conveyors

four or five weeks earlier and they would have had

an easier time with the labourer situation. The

problem with pulp mills and grain elevators is

this differentbreed of people. And they move from

place to place. They like to come home and spend

summer months and stuff with their kids and they

want to be sure they are going to work through the

winter and as soon as they have had a little play

time with their kids and families they take off.

When they see the job is coming to the end they

like to look for work that's going to keep them

going for the rest of the year and that's the

fact. Hence it was becoming very difficult for

these people to get additional tradesmen from the

hall, Ray and I checked this out many times and

there was nobody available in the hall. They were

offered people on permits, these are unqualified

people which would have been in my opinion

disaster even to have on the site. They tried to

get people from Alberta and the union would not

allow them to bring them into the area. They were

in a tough position here.

305.

Testifying with respect to the August 17 Daily Report Steel

said:

Q

A

Were you satisfied at the time that Crosstown was

doing all it could to get men?

Absolutely.

- 127 -

Q

A

Could you see that Crosstown and Ricketts-Sewell

were falling behind at that time?

No. I don't think that's a fair statement. How

can you fall behind when you've just been given

something to do.

306.

307.

308.

The foregoing illustrates the cumulative effect that the

late equipment delivery had on CMI's plan of work. The CMI

component of the project work was significant and it could not be

carried out until others had performed, specifically with respect

to the equipment and drawings.

(b) DEMOLITION

Marquis testified that CMI had to follow behind the

demolition being carried out by FCC's subcontractor Johnny Walker

in most instances, and that "there had been difficulties in terms

of Johnny Walker demolition finishing its work as quickly as

scheduled." But Steel testified that these delays were

overshadowed by equipment delays. This was also true for CMI.

Steel said that as of March 14, the cleaner deck equipment

was the only equipment available, so that was where the focus

occurred to complete demolition. However, he said that FCC did

not deem the cleaner deck to be on the critical path, so FCC

believed there was no point in accelerating the demolition. This

may have been accurate, but there is little doubt that demolition

delays generated a great deal of attention and concern. The site

minutes of April 4 at items 2.008.4, 2.008.6 and 2.008.7 record

that Johnny Walker's crew "are not staying ahead".

- 128 -

309.

While FCC says the demolition delay only resulted in its

float time of 3 weeks being used up, I am not satisfied that I

can reject the demolition delays as a causal factor in delaying

the work on the project. While clearly of much less significance

than the equipment delivery delays, the demolition delays

nevertheless had an impact on the progress of the work and to

that extent I conclude on balance that some responsibility must

attach to FCC. Based on the records made at the time I conclude

that the demolition delays likely delayed the progress of CMI's

work.

(c) IECO GATES - DESIGN

310.

I have earlier dealt with the issue of general drawing

delays. I now turn to drawing delays respecting the IECO gates.

IECO was to supply 108 gates to FCC under a materials supply

contract and hence responsibility for IECO's performance rests

with FCC. These gates were to be installed in the middle of

spouting runs, and therefore the spouting below the IECO gates

could not be installed until the gates were in place.

311.

On March 1 CMI delivered to FCC a list of their gate

availability requirements in order of priority. The site minutes

of March 2 record questions that IECO directed to FCC and CWMM:

"2.004 - IECO has requested that info required to clear up

design/fabrication details be pursued `Right Away'. Also

the final agreed count & type. IECO are requested to

- 129 -

prepare an outline suggesting how to deal with this. CWMM

advised that they are pursuing on a priority basis."

312.

These minutes confirm that it was not only the design

information that was late; as at March 2, the number and type of

the IECO gates were unresolved. The design details, however,

were to be pursued "right away".

313.

314.

The site minutes of March 28 show that item 2.004 - in

respect of the IECO gates - was still a major concern:

"2.004.6

This information was given to IECO in a

subsequent meeting today."

The site minutes of March 14 record the progress of CMI's

attempts to obtain IECO shop drawings, which were needed to

detail the spouting to be connected to them, since the site

meeting of February 21 recorded:

"1.010

Crosstown have requested shop drawings from IECO.

...

1.010.2

1.010.3

1.010.4

It was agreed that they would exchange details as

available with copies of transmittals to FCC.

FCC requested confirmation that this was

occurring.

FCC reiterated that this is of paramount

importance - NOW."

315.

The level of concern with the IECO schedule performance is

also reflected by entries in Steel's daily reports:

- 130 -

March 16 - "little is being done on our job by IECO."

March 22 - "this firm (IECO) seems to be waffling on all

their commitments."

316.

On April 25 CMI wrote to FCC stating that they needed IECO

shop drawings and were unable to detail related spouting without

them. IECO responded to CMI on April 26. They were waiting for

CWMM's clarification on 12 non-standard inlets, and would "be

unable to provide the shop drawings noted in your April 25 letter

to FCC until this is resolved and new dwgs completed".

317.

While FCC and IECO were delayed in part due to CWMM's delay

in furnishing design information, FCC must bear a share of the

responsibility for the delay in the provision of the IECO shop

drawings to CMI.

(d) SHOP DRAWING REVIEW

318.

As discussed earlier, the release of many of the "issued for

construction" drawings was delayed. As a result of these delays,

the CMI shop drawing preparation process was delayed, the review

by CWMM of the shop drawings of many of the equipment suppliers

was also delayed, and this caused "ripple effect" delays to CMI.

319.

Ultimately CMI elected to fabricate without having CWMM

approve its shop drawings. Whitaker gave discovery evidence as

follows:

- 131 -

Q

A

The fourth complaint that you had identified,

sir, was the late return of shop drawings.

Can you explain to me what that complaint was

all about and what effect that would have on

FCC's operations?

Well, the instance I'm thinking of involved

Crosstown. They had submitted shop drawings

for spouting and had not had them returned

after several weeks.

Why was it important to have the shop

drawings returned?

So that fabrication of the spouting could

proceed.

Q

A

***

Q

A

What was the explanation given as to why it

was taking so long to return the shop

drawings, if you can recall?

When the consultants were questioned on it

they replied that they were waiting for a

general arrangement drawing to show how these

detailed drawings fit into the scheme of the

structure.

Who was to prepare the general arrangement

drawing?

Crosstown. They requested that Crosstown

provide a general drawing.

Before you had complained to the consultant

regarding the late return of shop drawings in

this instance were you aware that C.W.M.M. or

Mr. Campbell had requested a general

arrangement drawing from Crosstown?

No.

Did Crosstown indicate to you, sir, that they

were aware that Mr. Campbell was waiting for

such a general arrangement drawing?

No.

Q

A

Q

A

Q

A

320.

Campbell explained the cause of the delayed review process

in the following portion of his evidence in chief:

Q

A

Did you have an expectation at the time of what

turn-around time you expected the various people

to turn the shop drawings around in?

Oh, it's a difficult question to answer. We, you

know, I could see one week or two weeks at the

- 132 -

most at what always occurs on a job, this job or

any other job like this is that all the shop

drawings have to, the award and they go out to the

general contractor send, you know, his structural

steel, everything all out, the hoppers and the

steel for the reclaim, everything they send it all

out together and all the shop drawings arrive on

your desk at the same time and it's impractical to

sort of upgrade youforces just to take care of a

temporary, you know,peak on the bell as it were,

but you'd like to see them turned around as fast

as possible. And if they get anything over two

weeks or so you start to get a little concerned

but in the case with FCC -- and this did occur

about the 1st of April we got scads and scads of

drawings and we got drawings on the big receiving

hoppers and on the structural steel for the

reclaim and what not and so we asked FCC for

priorities on this stuff and we worked to their

prior reports and tried to get them south as soon

as we do.

321.

Campbell's difficulty was that in early April CWMM was

inundated with, in his words, "scads and scads of drawings". The

necessary time to review these shop drawings dictated some delay

in approving them and returning them to the parties for

fabrication.

322.

That this was not Campbell's original intention is

demonstrated by his evidence in cross-examination as follows:

Q

A

So in your evidence in direct when you mentioned

the scads and scads of drawings that you received

on April 1st, including the big receiving hoppers

and the structural steel, the original plan was

that you wouldn't be doing those scads and scads

of drawings at the same time that you were

reviewing the re-selected equipment suppliers's

shop drawings, correct?

I think I can answer yes to that.

- 133 -

(e) PRESELECTED EQUIPMENT

323.

As documented in the April 25 site minutes delays to the

project schedule had become a major concern of all project

participants by that date. Many references can be seen in these

minutes, particularly at page 2, to meetings with Buhler to

discuss additional costs, the possibility of allowing some

spouting to be installed before conveyers were in place, and the

fact that drawings not yet been received from CWMM. A

significant comment can be found at paragraph 4.012.10 of these

minutes: "total schedule still under review due to conveyer

deliveries."

324.

325.

Steel testified that equipment deliveries were the "driving

power" behind the delayed project completion.

Whitaker testified on discovery as follows:

Q

A

All right. Go ahead.

The bucket elevator components are

late two-four and a half months.

Basement conveyors, one and a half

months late. South annex drag

conveyors, four to four and a half

months late. Drag conveyors in the

work house were from two to four

months late, with some items being

five months late. The items that

were five months late would affect

FCC's installation but not

Crosstown. Receiving bulk ware was

on time. Reclaim jack-legs were

two months late. Those are the

items on the list that would be --

would have tie-ins to Crosstown's

spouting and ducting.

326.

Spouting was installed in the grain terminal to connect the

various pieces of equipment. CMI could not commence its work in

a logical sequence until the equipment at the top of the run had

- 134 -

been installed, and could not complete its work until both of the

pieces of equipment connected by the spouting run had been

installed in their final locations.

327.

In his discovery Skodje described a meeting that was held on

August 31 at the Cannery Restaurant, attended by FCC, UGG and

CWMM representatives. He described FCC's views of CMI's problems

at that time: "They all of a sudden had a large(r) volume of

work than they had ever been led to anticipate because now we

have got all the material finally ... all at once."

(f) BASEMENT DRAG CONVEYORS

328.

329.

A specific example of late design and resultant delays to

CMI was caused by the change in some of the basement conveyers

from screw to drag conveyers.

This was a major change in design. Both the location of the

conveyors and the nature of the support steel was changed to

accommodate the new design. The support steel design was

finalized so late that the actual conveyers had to be assembled

and hung in their approximate locations on temporary supports to

await support steel. CMI could not attach spouting to these drag

conveyers until the conveyors were in their final locations. Tom

Adams testified as to the problems caused by the delay in

designing the support steel:

Q

What do you recall of the placement of machines

and conveyors on the UGG project, sir?

- 135 -

A

On the cleaner floor I believe the machines were

placed according to the prints. The basement we

had a major problem with the small drag conveyors.

In one instance which we couldn't do any field

measuring or prefab indication on spouts down into

the drags, excuse me, because of the structural

steel supports not being designed in time,

therefore, everything was hanging on either slings

or on tirfor cables. And until those units are

tied in solid you are basically wasting hours

trying to pre-measure them. That was a

major headache for us in the basement. It took

much longer I felt than it should have, though the

steel Should have all been pre-drawn by the engin

eersb

efore

we

even

came

throu

gh

the

door.

330.

331.

Steel described the 18 day delay in receiving a complete

response to FCC's June 8 FIR 52 seeking support details for the

basement drags. This also delayed CMI in awaiting installation

so that they could measure up these conveyors.

After the basement drag conveyors had been set temporarily

in their approximate locations, CMI was instructed by FCC to

proceed with the spouting work in that area. Later, because the

drag conveyors were not in their position of final placement at

the time CMI did the spouting work, CMI was required to realign

the spouting and add 1" to 3" spout fillers, as required. The

problems with the basement drags was a combination of design

delays and installation problems. At his discovery Rhodes said:

- 136 -

Q

A

How many drag conveyors are there

in the basement?

About eight, maybe ten.

Q

A

Were a lot of them delayed or just a couple?

No, a lot of them moved. I may

have missed a few, there's eight or

ten, something like that.

Were they all sort of in a state of flux?

Quite a few of them were.

Q

A

332.

333.

Hoffman testified that "All of them were out of alignment".

Rhodes gave further evidence on this point as follows:

Q

A

Do you remember what caused them to be delayed?

One thing was that they originally were going to

be screw conveyors and then it was decided to use

drag conveyors instead and so there were design

changes. The drives on the drag conveyors weren't

the same as the screw conveyors and they had to be

allowed for. So even when they were being

installed they didn't go in exactly as with the

same center lines as the screw conveyors.

Would that fact have essentially again invalidated

the field measurement in that area as far as

connection to those pieces of equipment?

Where the screw conveyor center line

Q

A

and elevation stayed the same but longitudinally

moved a couple of inches it wouldn't have mattered

there, but in some cases the elevation center

slope, and everything changed a little bit

that case it invalidated your field

it

lines,

and in

measurements,

was the

fitting

the

yes. The biggest problem in that area

conveyor-to-conveyor spout as far as not

because a lot of these conveyors carry on to

next one and to another one and when you started

moving those around it made a big difference in

interconnecting spouts.

Q

A

So it would [not] have been useful for Crosstown

to have measured or done nothing down there to

field measure before everything was set?

As far as I can remember they did the measuring

after they were set, especially for the

interconnecting spouting from

conveyor-to-conveyor.

- 137 -

Q

A

Did that delay their ability to

install the spouting in that area?

You obviously can't install it

until you have measure it in that

case.

334.

Hoffman testified as follows:

Q

All right. And then did you have

any discussions with Crosstown

representatives about the

alignment of the basement drags?

Yes, I did.

Who were those discussions with and what were

those discussions?

I talked with Tom and Howard and some of their

foremen, and I tried to make it clear to them

that the drag conveyors were not straight.

When you say you tried to make it clear to them,

do you recall what you said to them?

Don't put the spouts on. The drag conveyors

aren't straight.

Do you recall what response you got?

We have to do something. FCC says they're

done.

Now, is this more than one conversation?

Yes, it is.

A

Q

A

Q

A

Q

A

Q

A

335.

336.

Hoffman gave further evidence as follows:

Q

A

Mr. Hoffman, do you recall, with respect to the

basement drag conveyors, when the alignment with

the piano wire was actually done?

I believe it was early in September.

No claim was submitted and no evidence led by CMI on this

item because CMI thought at the time that the problems originated

entirely with Steel's crews. Out of respect for Steel, CMI

absorbed these costs. However it is nonetheless clear that this

alignment problem was the responsibility of FCC to the extent

- 138 -

that its failure to properly align before spouting was installed

delayed the progress of CMI's work.

(g) IECO GATES - DELIVERY

337.

338.

CMI was not only delayed as a result of the delay in design

information for the 108 IECO gates, but it was also delayed by

the late delivery of the gates themselves.

On March 1 CMI delivered to FCC a list of its gate

requirements, in order of priority. The site minutes of March 2

record that the design details would be pursued "right away". On

March 7 CMI wrote to FCC attaching an updated list of the IECO

gates and setting out the dates on which the gates would be

required. These dates were not met. Delays to the availability

of the gates ranged from 2 to 45 days in duration.

339.

Popowich testified that the March 7 letter was prepared to

advise FCC of the dates and sequence in which CMI would require

the IECO gates in order that CMI could comply with FCC's timelime

schedule:

Q

A

What was the purpose of preparing this attached

document on March 7th?

It was to give specific dates that the gates were

required by CMI for IECO to fabricate by.

Yes. Why did you give dates?

Q

A

They had a -- there was substantial number of

gates

that they had to manufacture. We had given them a

priority one listing the order followed with

priority

2 completing the order or the balance of the

gates.

- 139 -

This letter now starts stipulating which gates are

required by what particular time and so on and so

forth down the list.

Q

A

And how would you use this information regarding

the

date it was required in terms of your work?

Well, we would -- we had scheduled our work

accordingly or according to the FCC baseline

schedule

and --

The Time-Line schedule?

The Time-Line schedule. And in order for us to

meet those dates we required that IECO

with the gates in this sequence and by

Q

A

provide us

these dates.

Q

Did IECO in fact provide you with the gates in

that sequence and on those dates?

No. ...

A

340.

At the May 9 site meeting Skodje said the schedule had

slipped 3 weeks to that time, but that "it was not because of

Buhler but all of the suppliers, and pointed out particularly

IECO".

341.

On May 25 CMI wrote to FCC informing them that a recently

received schedule of deliveries for IECO gates was "totally

unacceptable", and that spouting for these gates was on the job

site and could not be installed until the gates had arrived.

Popowich testified:

Q

Now, on the basis of that, Mr. Popowich, did you

write a letter to Mr. Marquis on the 25th?

Yes, I did.

A

Q

And you say in your first paragraph: "As

mentioned in the above memo the proposed delivery

date of June 16th for certain gates" which I won't

note "is totally unacceptable. Spouting for these

gates is on job site and cannot be installed until

- 140 -

the gates arrive." Stopping there. Was that a

true statement that spouting was on-site?

Yes.

A

Q

Why couldn't the spouting be installed until the

gates arrived?

A

Again many of the gates were an integral part of

the spouting run and without the gate the spouts

just couldn't be installed.

You say -- and the next paragraph: "This matter

has become so serious that it is not only

Q

preventing us from crewing up but forcing us to

juggle our present crews around the delivery dates."

What does crewing up mean, sir?

A

Well, around that time we were adding about five

tradesmen a week to get up to peak crew and

without these gates being there it was affecting our

crew up position.

Q

Why were you adding five trades men a week at this

point in the project, May 25th?

A

Well, we had, you know, intended to crew up

earlier on the project, but being because of

deliv

ery,

late

deliv

eries

of

vario

us

piece

s of

equip

ment

our

crew

up

came

much

later

and

we

were

hopin

g to

get

that

crew

up at

a

fairl

y

quick

pays

- 141 -

(pace

) or

fairl

y

subst

antia

l

pays(

pace)

at about May the 25th. I believe we were a

attempting to add five tradesmen a week until we

got up to, I believe, around 40 on-site tradesmen.

Why 40?

Well, that, I believe at that particular time was

our projected peak crew.

Q

A

Q

A

You say forcing us to juggle our present crews

around the delivery dates. Why would that be?

Well, again, without gates being there and us

having the spouts there, then we couldn't install

certain runs of spouts because there were no

gates.

drags

Q

A

Next paragraph you say "I cannot sympathize with

IECO's problem any further. It is now costing us

money and project scheduling delays." What money

was it costing you?

Well, again, we are getting back to a matter of,

you know, stop and go and productivity loss and

unfortunately there were not other areas of the

plant that we could go. There were no Buhler

or no Nord-Sen or Buhler gates. I don't

believe the

distributors at that

particular time were in place, so because of

that we were being forced to work on the

cleaner deck and when equipment wasn't there

we couldn't -- we had no place to juggle the

crews. There was no place to go.

342.

The issue of delivery dates had still not been resolved by

June 13 when CMI sent a fax to FCC stating that "all spouting for

garner number 5 is on site, we are still missing gate DVC - 053

(sic) which is "preventing us from installing spouting.....this

is getting to be very serious to keep a crew working in upper

work house."

- 142 -

343.

FCC says that while the IECO gates may have been delivered

late from its sub-contractor, that late delivery was not an

effective cause of delay. It says the effect of the late IECO

gates was overshadowed by the other delay factors such as the

pre-selected equipment and design drawings. However, based on

the evidence at the time, I conclude that the late delivery of

the IECO gates caused CMI's work on the project to be delayed.

(h) BUHLER DRAG CONVEYORS AND GATES

344.

CMI's March 27 schedule shows installation of spouting to

the Buhler drags in the annexes between April 3 and July 10.

Skodje confirmed the effect of the late delivered Buhler

equipment at his discovery as follows:

Q.

Did you believe, in May of 1989, that the

failure to deliver this type of equipment and

materials - I'm suggesting in particular the

Buhler drag conveyors - that it was going to

impact upon your subcontractors like

Crosstown?

A.

Q.

It was going to impact on us.

In turn, would that impact upon your

subcontractors?

A.

Quite likely.

345.

346.

Based on the entry in the FCC Daily report of July 18:

"expecting last truck tomorrow", it appears that the last Buhler

drag conveyors did not arrive on site until after that date.

Steel also recorded that CWMM had informed him of the Buhler

gate tolerance problem. The resulting hold on conveyors B1 and

- 143 -

B2, documented in CWMM's July 25 letter to FCC continued for CMI

until mid-October, when spouting installation was resumed.

Campbell gave the following evidence with respect to the spouting

that was attached to those gates in his examination in chief:

Q

If you turn to July 25th in Exhibit 78 -- I'm

sorry, 105 B. You should find there a letter from

yourself to Mr. Marquis. And in that letter you

say, "with regard to the above conveyors please

proceed as follows pull the top chains only until

the gates and gate plates can be rectified. Do

not pull the bottom chains." Can you explain what

that means and why you gave that instruction?

Well, you can appreciate in order to even check

A

these gate plate tolerances you have to get inside

the

conve

yor

with

the

botto

m

chain

pulle

d it

would

be

almos

t

impos

sible

to

crawl

up

and

down

the

conve

yor

as it

were.

Q

Did you give any instructions, Mr. Campbell, with

respect to spouting from these conveyors relating

to the tolerance problem?

A

Q

Not do I recall.

Could spouting be placed on these conveyors when

the tolerance problem was unresolved?

A

Well, I guess, my lord, it could be but then you

- 144 -

could appreciate the spouting would be attached to

the gate and if the gate had to be jigged around a

bit or moved or adjusted or whatever, then you'd be

dragging the spout with it. It would be an awful

lot more work.

347.

348.

As described above, CMI was not able to install spouting to

these conveyors until mid-October.

(i) LABOUR SHORTAGE

CMI's December 5, 1988 proposal explained that "Manpower

will not be a problem at this company, we presently have an

active waiting list of key site personnel for engagement."

Steel described conversations with CMI, which illustrated the

good supply of labour early in the job, as follows:

A

The electricians didn't feel they had a problem

and nor did Crosstown.

Q

A

This was at the beginning of the job?

Yes. It was going to hit them right at the time

they told us.

Q

A

Q

A

Who told you that?

Randy and Howard Popowich.

Told you what and when?

On the first days in the site in the trailer when

[CMI] were doing their shop drawings that it was a

per(fect) time for them. They were in between

and it was just a perfect time for staff, for

people, the whole ball of wax. That's the

reason they were so anxious to get on the

site and why they were the first people

there, I guess.

jobs

349.

By May 2 FCC had concluded there was no need to crew up to

their expected peak manpower, nor to institute a second shift,

since nothing would be gained by so doing. Skodje gave evidence

- 145 -

of this in cross-examination referring to the May 2 site minutes

11.015, as follows:

Q

Were you aware that as of that time there was

equipment to be installed and it was sitting

waiting for installation and Mr. Van Dyke was

the position with FCC that a second crew

could be

taking

now

used to start installing equipment which had

arrived but was not yet being installed?

Mr. Van Dyke was not the contractor. There was

some pieces of equipment there, the majority had

been brought to our attention that it was late and

therefore there was no need to exercise a second

shift whatsoever and you'll follow that all the

equipment went in on a timely basis when it

A

arrived without a second shift. If the material is

not there, we can't install it and we're not

obliged to have forces there waiting.

350.

351.

On May 4 CMI wrote to FCC and listed certain factors that

were preventing CMI from crewing up. Steel testified that as of

May 25 CMI "were doing fine at that particular time" in terms of

manpower.

But by July the available supply of sheet metal workers had

diminished. In reference to his July 12 and 21 daily reports,

Steel testified that it was becoming very difficult at that time

for CMI to get additional tradesmen from the union hall. He said

that he and Marquis checked for themselves many times and found

that "there was nobody available in the hall." CMI formally

notified FCC of this in its letter of July 21.

- 146 -

352.

CMI was still attempting to crew up in July, whereas its

original schedule anticipated completion by then. In addition,

CMI accelerated the work to mitigate earlier and ongoing delays,

which caused it to need larger crews than originally planned.

All of this took place at a time when there was a shortage

of qualified tradesmen, which had not existed in March through

May when CMI had originally planned to crew up.

353.

CMI says that the labour problems they experienced, any

resultant delays to completion of the project, and their

increased labour costs of premium time, would not have occurred

but for delays which were beyond CMI's control. Its costs

incurred form the basis of its claims to recover overtime

premiums, extended overheads, and lost productivity.

354.

I conclude that CMI was hindered by the shortage of labour

by the time it increased its forces. But for the project delay,

CMI would have been able to obtain the necessary manpower had it

been able to ramp up its forces earlier in the spring as

originally planned.

PROJECT DELAY - CWMM AND UGG

(a) FCC HOURS

- 147 -

355.

In his August 24 letter to Pope identifying the factors

causing completion past August 31, Campbell stated that FCC had

failed to meet the manhour projections in its tender. However

his calculation was done by taking 150 men per day multiplied by

9 hours per day multiplied by the number of days between March 6,

1989 and August 24, 1989 (which was 108 days). Campbell

acknowledged in cross-examination that FCC had no contractual

obligation to have that manpower on site.

He also had no

explanation as to why he did not refer in the letter to the

reference to additional work and extra time in the site meeting

minutes or in the memo from Marquis. I accept Steel's evidence

that FCC staffed at levels that "smoothed out" variations from

week to week in the available work. I conclude there is no

evidence to support the contention that FCC understaffing delayed

the project.

(b) FCC EXPERTISE

356.

UGG and CWMM say that some of the FCC personnel identified

in its tender did not in fact work on the project. However FCC

was entitled to substitute personnel and there is no evidence

that its personnel who worked on this project lacked competence.

I have earlier made findings with respect to the specific FCC

acts or omissions that contributed to the project delay.

However, I do reject the broader contention advanced by the

defendants that the project was delayed because FCC failed to

- 148 -

provide either all of the senior personnel listed in its tender

or that the senior personnel who were supplied lacked competence.

(c) CMI EXPERTISE, PERSONNEL AND RESOURCES

357.

CWMM and UGG say that CMI's personnel lacked the necessary

expertise or experience to take on this complex refit project.

They say the spouting fabrication and installation with its

complexity and time constraints required more than one

subcontractor. However, based on the evidence of the CMI

witnesses, I am satisfied that it had the necessary experience to

take on this project at the time it tendered. No expert evidence

was tendered contra.

(d) CMI - 2 VS 4 PIECE SPOUTING AND WELDED FLANGES

358.

CWMM and UGG say that CMI erred in its decision to use the

more rigid two piece spouting instead of the more flexible four

piece spouting, as well as in using welded flanges which further

precluded adjustments in the field at the time of installation.

However, CMI made it clear to the parties before the tender was

awarded that it planned to use two piece spouting. Had the CWMM

construction drawings been more accurate, the two piece would

have been a more efficient mode.

359.

However I do accept the defendant's contention with respect

to the welded flanges, and find that, in part, the delay CMI

- 149 -

experienced in its work was aggravated by its decision to weld

the flanges prior to installation.

(e) FIELD MEASUREMENT

360.

UGG and CWMM say that despite the clear obligation to field

measure placed upon CMI under the Prime Contract and the notice

it was given to comply with this term, CMI chose to fabricate

without field measurement and that this was a principal cause of

CMI delay. This requires a consideration as to whether the field

measurement procedure used by CMI complied with the requirements

in the prime contract. All parties agree that the failure of

much of the prefabricated spouting to fit without interference

when installed delayed CMI.

361.

In its argument UGG characterized this as a principal cause

in these words:

Despite the clear obligation to field measure which was

placed upon Crosstown under the Prime Contract, and the

clear and unequivocal notice he was given that he was

to comply with this term, Crosstown chose to fabricate

without field measurement. It submitted shop drawings

without first having 'determined and verified all field

dimensions.' In doing so it breached its contract.

362.

CWMM echoed this in its submission:

The main cause of CMI's problems, apart from

underbidding the job, was its failure to comply with

Division 15 - Mechanical Systems Section 15B

-

Spouting. This has been quoted above and was commonly

referred to in evidence as the field measuring and

field fit specification. Gordon Adams gave expert

evidence, adopted by CMI to a large extent in its case,

- 150 -

as to the trade practice to be followed in complying

with that specification, and as to the plan Bisco had

formulated if this job had been awarded to it. Mr.

Rhodes gave similar evidence regarding Carter Day's

plan for compliance with that specification.

363.

364.

CMI and FCC say that CMI was entitled to fabricate from the

CWMM construction drawings and that the specification required

that only the last piece of spouting in a run was required to be

field measured and "cut to suit" or field fitted at installation.

In my view, the real issue is which party had the obligation

to verify the design to detect interferences prior to fabrication

and to rectify discrepancies.

365.

The CMI Subcontract provided:

All work shall be done in a proper and workmanlike

manner and in accordance with the requirements within

such documents as drawings, specifications,

instructions, instructions to bidders, general

conditions and supplementary general conditions, issued

before the date of submission of Sub-Contractor bids to

the Prime Contractor or as modified herein), [sic] and

this Sub-Contract Agreement including the Sub-Contract

Conditions (and Appendix" A") forming part hereof.

(Page 2(a)).

The provisions of the Prime contract insofar as they are

applicable are incorporated by reference into this

Agreement. (Paragraph 15, Appendix A.)

366.

Specification 15B.1 of the Prime Contract states:

"15B.1

SCOPE

- 151 -

15B.1.1

15B.1.2

This specification covers the

general requirements for the

design, fabrication and

installation of new spouting.

The Contractor shall check all

spouting drawing dimensions in the

field before fabrication and

installation of all spouting. Any

field modifications to spouting

shall be solely the responsibility

of the Contractor.

15B.1.3

15B.1.4

Submit shop drawings to the

Engineer for review prior to

assembly of gates, elbows and all

other items except for straight

spouting.

Support angles, straps and bracing

required to adequately position and

support the spouting shall be

determined from an examination of

site and shall be furnished and

installed by the Contractor.

15B.1.5

Under certain circumstances some

existing spouts, scheduled for

removal from present systems, may

be reused. Wherever feasible when

existing spouting has been removed

and sizes are compatible with new

spouting specified, the removed

spouting has been removed and sizes

are compatible with new spouting

specified, the removed spouting may

be reused. Lined or plain spouting

may be used for vertical spouts.

Sloping spouting must have new

liners installed for re-use.

Reinstalled spouting will have to

be repainted."

367.

GC34 deals with shop drawings. Two provisions read as

follows:

"34.2

The Contractor shall arrange for the

preparation of clearly identified shop

- 152 -

drawings as called for by the Contract

Documents or as the Consultant may

reasonably request.

34.3

Prior to the submission to the

Consultant the Contractor shall review

all shop drawings. By this review the

Contractor represents that he has

determined and verified all field

measurements ..."

368.

The stamp placed upon shop drawings by the Consultant

states:

"Reviewed for conformance with general design concept.

Contractor still responsible for errors or omissions

and for meeting requirements of contract documents."

369.

The following issues must be considered:

1.

On a true construction, did 15B.1.2 require the

last piece of spouting in every run to be field

measured or field fitted or did it require the

entire spouting run to be so measured?

2.

3.

If 15B.1.2 is ambiguous and reference to parol

evidence is required to construe the provision,

what does that evidence demonstrate?

In the alternative, if the provision has the

meaning argued by CWMM and UGG, was CMI's

- 153 -

fabrication method a reasonable compliance with

15B.1.2 in the circumstances?

1.

True Construction of 15B.1.2

370.

In Edgeworth Construction, McLachlin, J. said at p. 221:

...In the scheme of things, it makes good practical and

economic sense to place the responsibility for the

adequacy of the design on the shoulders of the

designing engineering firm, assuming reasonable

reliance and barring disclaimers.

(emphasis added)

371.

On UGG and CWMM's construction of 15B.1.2, the "adequacy of

the design" of the spouting would be shifted from the shoulders

of the engineer to the shoulders of CMI. In my view, the section

is not an "adequate disclaimer" of engineering responsibility in

respect of the spouting drawings.

372.

The principle of construction, taken from B G Checo is that

the Prime Contract is to be construed as a whole.

The Prime Contract provides in Section 1.6, as follows:

"1.6 Supply and Install...

1.6.2 Spouting and valves and all distribution

pots, garner bottom, complete, in accordance with

the drawings and specifications...".

(emphasis added)

373.

18.1 of the Instructions to Bidders provides:

"18.1

The Contractor shall be responsible

for as built drawings for

- 154 -

Contractor initiated changes to

mechanical and structural work and

shall keep 1 (one) set of prints,

including revision drawings, in the

job site office."

(emphasis added)

374.

375.

In the Form of Tender, paragraph 1 begins:

"Having carefully examined the tender drawings...the

undersigned offers to complete the work as set down

therein'...".

GC 1.9 provides:

"1.9 Drawings...furnished by the Consultant are

and shall remain his property with the

exception of the signed contract sets

belonging to each party to this Contract.

Such documents...are to be used only with

respect to the Work and are not to used on

other work. Such documents...are not to

be... revised in any manner without the

written authorization of the Consultant."

(emphasis added)

GC 25.3 provides:

376.

"25.3

The Contractor shall have the sole

responsibility for the design,

...of temporary structural and

other temporary facilities and the

design...of construction methods

required in their use."

(emphasis added)

377.

GC 34.3 provides:

"34.3 Prior to submission to the

Consultant the Contractor shall

review all shop drawings. By this

review the Contractor represents

that he has determined and verified

all field measurements,..."

- 155 -

378.

Pursuant to 15B.1.3 CMI was obligated to "submit shop

drawings to the Engineer for review prior to assembly of gates,

elbows and all other items except for straight spouting".

(emphasis added)

379.

380.

15B which deals with spouting is to be contrasted with 15C

which deals with dust control ductwork.

for design in 15C.2.

15C explicitly provides

In my view, 15B.1.2 required CMI to field check the

dimensions of its spouting before installation. The section did

not require CMI to field check all building measurements before

fabrication of spouting, nor to ferret out design errors made by

CWMM in drawing spouting which conflicted with other spouting,

other pieces of equipment, or parts of the building. CMI was

responsible for "field modifications" if it did not "check all

spouting drawing dimensions in the field" before fabrication.

CMI was responsible for problems that could be corrected in the

field. There is nothing in 15B.1.2 that contemplated that CMI

would be liable if additional pieces of spouting had to be

fabricated in order to allow the spouting to avoid other

spouting, machinery or parts of the building or to rectify CWMM's

design errors. A review of construction drawings shows

measurements related to work points. A particular spouting run

could contain a number of twists and turns which included elbows,

specially fabricated pieces and straight sections. If it were

- 156 -

the intent of UGG to shift the obligation for verification of the

validity of the spouting run design to FCC or CMI, the shop

drawing requirement in 15B.1.3 would have included a requirement

for shop drawings for straight spouting as well in order to

determine the length of a particular run. The Prime Contract

would have required the submission of shop drawings for complete

spouting runs, rather than elbows or transition pieces.

381.

Further support for this construction can be found in GC

34.3, where the verification of field measurements by FCC was

restricted to shop drawings and did not include verifying the

field measurements of CWMM in its design drawings. Since CMI was

not obliged to submit shop drawings for complete spouting runs,

FCC was not obligated to verify field measurements for complete

spouting runs.

382.

383.

If the interpretation argued by UGG and CWMM is correct, the

specification would have required CMI to check and verify the

field measurements of CWMM on its construction drawings and

revise those drawings contrary to GC 1.9.

In my view, when the other provisions of the Prime Contract

are considered, the Prime Contract did not oblige CMI (or FCC) to

field measure the Terminal. There is no language in the Prime

Contract that shifts the design obligation for the spouting to

- 157 -

CMI. 15C, with respect to dust control, specifically imposes the

design obligation on CMI, 15B does not.

384.

On a true construction of 15B.1.2 the specification

contemplates field measuring or field checking the last piece in

any run. It does not require field checking the total length of a

run, nor does it require CMI or Foundation to field measure the

Terminal to locate design errors made by CWMM in its depiction of

the location of parts of the building, equipment or spouting runs

which are designed so as to collide with each other.

2. Parol Evidence

385.

There was considerable evidence led by the parties with

respect to the meaning of 15B.1.2. The rule on the admissibility

of subsequent conduct evidence was stated in Canadian National

Railways v. Canadian Pacific Limited, [1979] 1 W.W.R. 358

(B.C.C.A.); aff'd [1979] 6 W.W.R. 96 (S.C.C.). Lambert, J.A.

(Seaton, J.A. concurring) said at page 372 - 373:

"In Canada the rule with respect to subsequent conduct

is that, if, after considering the agreement itself,

including the particular words used in their immediate

context and in the context of the agreement as a whole,

there remain two reasonable alternative

interpretations, then certain additional evidence may

be both admitted and taken to have legal relevance if

that additional evidence will help to determine which

of the two reasonable alternative interpretations is

the correct one. It certainly makes no difference to

the law in this respect if the continuing existence of

two reasonable alternative interpretations after an

- 158 -

examination of the agreement as a whole is described as

doubt or as ambiguity or as uncertainty or as

difficulty of construction.

The types of extrinsic evidence that will be admitted,

if they meet the test of relevance and are not excluded

by other evidentiary tests, include evidence of the

facts leading up to the making of the agreement,

evidence of the circumstances as they exist at the time

the agreement is made and, in Canada, evidence of

subsequent conduct of the parties to the agreement.

However, to say that these types of evidence become

admissible where two reasonable interpretations exist

is not to say that the evidence, if tendered, must be

given weight. In the case of evidence of subsequent

conduct, the evidence is likely to be most cogent where

the parties to the agreement are individuals, the acts

considered are the acts of both parties, the acts can

relate only to the agreement, the acts are intentional

and the acts are consistent only with one of the

alternative interpretations. Where the parties to the

agreement are corporations and the acts are the acts of

employees of the corporations, then evidence of

subsequent conduct is much less likely to carry weight.

In no case is it necessary that weight be given to

evidence of subsequent conduct. In some cases it may

be most misleading to do so, and it is to this danger

that allusions are made throughout the recent English

cases, particularly L. Schuler AG v. Wickman Machine

Tool Sales Ltd., supra, and James Miller & Partners

Ltd. v. Whitworth Street Estates (Manchester) Ltd.,

supra. In England the risks have been considered

sufficiently grave that the possibility of illumination

from the use of subsequent conduct has been ruled out.

In Canada they have not, but those risks must be

carefully assessed in each individual case before

determining to give weight to subsequent conduct."

386.

387.

At page 377, Craig, J.A. said:

"The law of Canada does permit subsequent conduct to be

used as an aid in construing a contract if, but only

if, the contract is ambiguous in some respect."

In B.C. Hydro and Power Authority v. Cominco Ltd. (1989), 34

B.C.L.R. (2d) 60 (C.A.), the Court said at page 74:

- 159 -

"The third issue raised by Hydro concerns the

admissibility of the evidence concerning the subsequent

conduct of the parties. The law is clear that in

Canada evidence of post-contractual conduct can be

considered in the event of an ambiguity in the

contract."

388.

Much of CWMM's evidence concerning the construction of

15B.1.2 is that the specification obliges CMI to "field measure".

However, while the evidence of Rhodes and Gordon Adams about the

meaning of "field measure" on other projects is evidence of

practice or custom, it is of limited assistance to a construction

of 15B.1.2, the contractual language in this case. Most

importantly, it does

not constitute evidence of the conduct of

the parties to the Prime Contract in this case.

389.

Both Rhodes and Gordon Adams gave evidence that as soon as

they were awarded the contract they would have begun field

measurements. However, 15B.1.2 must require checking

construction drawing dimensions in the field, not the tender

drawings. CMI was not obligated to build to the tender drawings,

it was obligated to build to the construction drawings. Tom

Adams gave evidence which I accept that CMI could not comply with

Section 15B.1.2 prior to the issuance of the construction

drawings.

- 160 -

390.

Campbell explained in his discovery why CWMM did not field

measure but merely used UGG's old drawings as the tender

drawings:

"So you check and you use old drawings as much as

possible and, of course, when this engineering was done

all the existing equipment was all over the floor. You

have to appreciate that. Then when all the existing

equipment is removed you have a nice clean area to work

with. You can line up your conveyors, measure all your

distances and check all the dimensions that are on the

engineering drawings before you put them on shop

drawings and fabricate. It's the process that takes

place."

391.

Campbell agreed in his examination for discovery:

"The most accurate way to check spouting drawing

dimensions in the field before fabrication is to check

the drawing dimensions after the equipment has been

installed."

392.

393.

When 15B.1.2 was drafted it was contemplated "the equipment

would be installed before the spouting drawing dimensions in the

field were checked".

On the evidence of Campbell, the construction of 15B.1.2

proposed by Rhodes and Gordon Adams, if admissible, cannot be

supported. To field measure as they proposed was impossible. It

is not necessary to wade through the conflicting evidence at

trial concerning the definition of field measurement to conclude

that the definition advanced by CWMM and UGG of field measurement

could not be what was contemplated by 15B.1.2.

- 161 -

394.

When I consider the admissible evidence, I conclude that the

meaning to be given to 15B.1.2 is that proposed by, and adopted

by CMI during the course of construction.

Hoffman, who

supervised CMI's work during the Project, said:

"...when we're talking about field measuring, we

anticipated field measuring at least one piece in every

spout run."

395.

Van Druten, who reviewed CMI's shop drawings, explained that

he marked on a CMI shop drawing that the subcontractor should

field measure a piece because "this was in effect the last piece

in a run before it hit the diamond head and changed direction".

Van Druten said that field measure and field check meant the same

thing. Van Druten said:

"I told him [John Derhouson] that that's impossible.

You always have to have one section in the spout that

you make longer and trim it in the field or measure it

exactly in field and fabricate it. But you always have

to have some piece of spout that you use for the final

connection."

396.

397.

Other witnesses gave the same or similar evidence, as to

their conduct on the Project, that is field measure means field

measure the last piece in any particular run.

I prefer the evidence of Derhouson, Popowich, Tom Adams,

Hoffman, Van Druten and Campbell on his examination for discovery

- 162 -

to the evidence of Campbell at trial. In my view, 15B.1.2 did

not require CMI to field measure the Terminal.

3. CMI Reasonably Complied With 15B.1.2

398.

Alternatively, if Clause 15B.1.2 is construed to have

required CMI to field measure beyond the last piece in each

spouting run, CWMM and UGG, by their conduct, rendered it

impossible for CMI to comply with 15B.1.2 and CMI's attempted

compliance was a reasonable response to the equipment delivery

and drawing delays.

399.

As stated above, the provision can only relate to

construction drawings. As Tom Adams said in cross-examination:

"We didn't receive the construction drawings until

well, almost into March, I believe. So unless you have

your construction drawings you can't assume the tender

drawings are going to be close. They were for only

reference for bidding, I believe was the purpose for

those."

400.

The spouting drawings for the Primary Wheat Reclaim area

were issued for construction on February 17, but of the seven

drawings, five drawings had holds which were not removed until

May 30. The spouting drawings for the Primary Wheat Cleaning

were issued for construction on February 17. One drawing was

revised on March 30, two drawings had holds removed on May 19.

Further revisions were made to one drawing on May 31 and on June

- 163 -

5. The spouting drawings for the Distribution area were issued

for construction on February 16. Eight drawings were revised on

April 24. A further drawing was revised on May 18. Two drawings

which were revised for the first time on April 24 were revised

again on May 18 and June 5 respectively. Spouting drawings for

the Bin Floor were issued for construction for the first time

between March 13 and March 15. Four drawings were revised on

April 14. A further drawing was revised on June 28.

401.

Construction drawings had holds placed on them which

affected the spouting relating to the drawing. In the Wheat

Reclaim area five general arrangement drawings had holds placed

on them. The holds affected associated spouting and "field

measuring". In the Primary Wheat Cleaning area one general

arrangement drawing had a hold placed on it which would affect

associated spouting and "field measurements". In the Bin Floor

area, holds were placed on slide gate layouts and structural

drawings for the conveyors, all of which affected associated

spouting and "field measurements".

402.

Many witnesses gave evidence concerning the difficulty with

field measuring without the preselected equipment in place.

Campbell admitted that the most accurate way to check

measurements in the field is with the equipment in place. Some

witnesses gave evidence that it was possible to field measure

without the preselected equipment being in place so long as you

- 164 -

had the certified prints for the equipment. Other witnesses went

so far as to suggest that you could field measure without the

equipment or the certified prints so long as the engineer

confirmed that the drawings were accurate. However, one thing is

clear. Field measurements in respect of spouting which would

connect to any of the preselected equipment before the equipment

was delivered and before the certified prints were produced

required reliance on the engineering drawings and their accuracy.

403.

In the circumstances, CMI's decision to rely on the CWMM

drawings and to field measure the last piece was the best that

CMI could be expected to do to comply with 15B.1.2. I find that

the steps CMI took were reasonable. It would have been

unreasonable to wait until the preselected equipment was

delivered. It would have been unreasonable to wait until CWMM

and the equipment suppliers had resolved design issues so that

certified prints could be issued. It would have been

unreasonable to fabricate in any way other than the way in which

CMI did.

404.

I conclude that 15B.1.2 did not require CMI or FCC to field

measure the Terminal. There is no disclaimer in 15B.1.2

suggesting that it would be unreasonable for CMI to rely on the

accuracy of CWMM's drawings. On its true construction, 15B.1.2

required CMI to field measure the last piece in any spouting run

and made CMI responsible for any field modifications if they did

- 165 -

not do so. The parol evidence confirms this construction of

15B.1.2. Even if the construction of 15B.1.2 is that proposed by

CWMM and UGG, in the circumstances CMI reasonably complied with

the provision.

CONCLUSIONS ON PROJECT DELAY

405.

CWMM says that the plaintiffs have failed to provide an

explanation as to why the work was not done when planned. It puts

the question: Has FCC proved that it suffered loss or damage? It

concedes that where damage flows from a breach of contract, but

quantification cannot be established, then the court must

nonetheless do the best it can. It says that it was FCC's task

to show that the matters complained of had an impact on the

course of the work. It says to prove this FCC should have called

Whitaker who did the scheduling; it should have called evidence

of the specific effects of each identified specific breach. If a

cumulative effect is contended as in this case, FCC should have

led evidence in specific time periods of the cumulative effects

of the beaches. While CWMM says this is often done by an expert

witness, it says FCC could have accomplished this by calling FCC

witnesses to testify using the FCC schedule and identifying the

delay factors in a particular time period and the effect of these

factors on the August 31 completion date.

- 166 -

406.

However in my view FCC has proved that the proximate cause

of the progress of its work on this project being delayed past

August 31 was at least in part caused by the acts or omissions of

UGG and CWMM. The most serious cause of delay was the late

availability of the preselected equipment. I have earlier

reviewed the discrepancy between the mid-March date for

deliveries of the preselected equipment represented to the

tenderers and the actual knowledge of CWMM and UGG at the time

the contract was awarded February 10. Equally instructive is the

difference between the delivery information that FCC had received

from the equipment suppliers by March 10, one month after it had

been awarded the contract, and the actual deliveries, which is

shown in the following table taken from FCC's reply argument:

Prepurchase

Equipment

Supplier

Delivery Information

as of

Actual Delivery

March 10, 1989

Carter Day

Wheat Reclaim

Equipment

End March (1

Screenerator 1

March)

Mid April except

Thresher End April

Misc. items - Mid May

Ebco Distributors Motors 19 May/89

Rest 07 Apr/89

[Single distributors]

12 May except Motors.

[Dual distributor]

30 May except motors

Only 1 motor of 6 end

of July, 3 on 14 Aug,

14, 2 on 22 Sept

Shop test with

temporary motors

end March

General Railway

Retarders

15 Mar/89 Ready to

ship awaiting P.O.

04 May/89

Transcontinental

Motors=to Hansen

15 May to 07 Jun/89,

New buckets 31 Jul/89

Bucket Components Shafts= 20 Mar

Buckets=07 Apr

Steel=7 Apr

- 167 -

Hansen

20 Mar/89 P.O.

17 May/89

01 May/89

Bucket Elevator

Drives

needed prior to

shipping

Bisco Conveyors

Nord-sen Gates

12 May/89

30 Apr/89

13 July to 01 Aug/89

Repairs by 03 Aug/89

Buhler Conveyors

End May End June

03 Apr/89

15 May to 20 Jul/89,

(except 2 insp. gears,

1 solenoid 14 Aug

Repairs by 28 Aug

Concise Car

Opener

Track 07 Jun/89

Opener 01 Aug/89

Carter-Day

20 May/89

30 Apr/89

08 May/89 Except

Belting 21 Jun/89

Reclaim Jack-legs

Klockner-Moeller

Motor Control

Centres

02 May to 19 Jun/89

407.

In my view this clearly illustrates what Campbell was

speaking of in his August 24 letter to UGG in which he identified

late equipment deliveries as a factor in the failure to achieve

substantial performance by August 31. In addition, FCC could not

complete its contract work until the administration building was

available. This did not occur until November.

408.

Hence I conclude that by reason of the delays in the

delivery of the preselected equipment and drawings and the

completion of the administration building, FCC has shown that it

was delayed past August 31 in achieving substantial performance.

- 168 -

Although the other factors I have referred to such as the dock,

computer programing and extras likely also delayed FCC, I cannot

conclude that these were other than concurrent. Accordingly I

find that FCC has established that it was delayed by the acts or

omissions of CWMM and/or UGG for a period of 3 months past the

August 31 completion date.

409.

The preselected equipment and drawing deliveries also

delayed CMI in its work. In addition, I have also found that FCC

contributed to the delays experienced by CMI by reason of the

demolition, the IECO gates and the basement drag conveyors. When

assessing the extent to which FCC is entitled to indemnity from

CWMM and UGG in respect of the CMI claims, it is necessary to

make a finding of comparative fault between the parties. As

between CWMM and UGG and FCC, I would apportion the

responsibility for the delays for which CMI is entitled to

compensation at 75% CWMM and UGG and 25% FCC.

410.

While I have found that CMI's decision to use welded flanges

delayed it in its work, that decision did not materially delay

substantial performance.

FCC NEGLIGENT MISREPRESENTATION CLAIM

(a) CONTRACTUAL EXCLUSION?

411.

The law respecting the negligent misrepresentations of an

engineer or owner in a contractual setting was recently discussed

- 169 -

by the Supreme Court of Canada in BG Checo v. B.C. Hydro, [1993]

1 S.C.R. 12 and Edgeworth Construction Ltd. v. N.D. Lea &

Associates Ltd., [1993] 3 S.C.R. 206.

412.

In both cases the Supreme Court of Canada held that

notwithstanding the existence of a contract between a contractor

and an owner, an action lay in tort against an engineer for its

conduct in the design stage and during the course of

construction. The Court held that an engineering firm could owe

a duty of care in tort to a contractor. In BG Checo the

contractor was entitled to sue the owner, who was also the

engineer, both in contract and in tort. In Edgeworth the

contractor was entitled to sue the engineer in tort, where the

engineer prepared the tender documents but did not play any part

in the administration of the contract.

413.

In BG Checo at p 26 the majority stated in dealing with the

principal of concurrency in tort and contract:

In our view, the general rule emerging from this Court's

decision in Central Trust Co. v. Rafuse [1986] 2 S.C.R. 147,

is that where a given wrong prima facie supports an action

in contract and in tort, the party may sue in either or

both, except where the contract indicates that the parties

intended to limit or negative the right to sue in tort.

This limitation on the general rule of concurrency arises

because it is always open to parties to limit or waive the

duties which the common law would impose on them for

negligence. This principle is of great importance in

preserving a sphere of individual liberty and commercial

flexibility. Thus if a person wishes to engage in a

dangerous sport, the person may stipulate in advance that he

or she waives any right of action gainst the person who

operates the sport facility: Dyck v. Manitoba Snow-mobile

- 170 -

Association Inc. [1985] 1 S.C.R. 589. Similarly, if two

business firms agree that a particular risk should lie on a

party who would not ordinarily bear that risk at common law,

they may do so. So a plaintiff may sue either in contract

or in tort, subject to any limit the parties themselves have

placed on that right by their contract. (Emphasis added).

The mere fact that the parties have dealt with a matter

expressly in their contract does not mean that they intended

to exclude the right to sue in tort. It all depends on how

they have dealt with it."

(Emphasis added)

414.

415.

416.

After B.G. Checo and prior decisions dealing with

concurrency, it is clear that the right to sue in tort is not

taken away by the existence of a contract between the parties.

It is only taken away to the extent that the language of the

contract limits the scope of the tort duty or waives the right to

sue in tort.

In the case at bar, the definition of "contract" in the

prime contract deals with the exclusion of the right to sue for

pre-contractual representations. It states, in part:

"The Contract ... represents the entire agreement

between the parties. The Contract supersedes all prior

negotiations, representations or agreements, either

written or oral, including the bidding documents."

Is this language sufficient to bar a claim by FCC for the

negligent representations it says were made by CWMM on UGG's

behalf?

- 171 -

417.

UGG relies on Carman Const. Co. v. CPR [1982] 136 D.L.R.

(3rd) 193 (S.C.C.) where the court held (at p.203) that a similar

clause operated to discharge any duty of care owed by the owner

to the contractor for pre-contractual representations. However

in Carmen the disclaimer clause stated:

"It is hereby declared and agreed by the

contractor...that the Contractor does not rely upon any

information given or statement made to him in relation

to the work by the company."

418.

In the case at bar the language does not expressly limit the

tort duty or waive the right to sue in tort. Given the principle

in B.G. Checo, a statement that a contract represents the "entire

agreement" would at the highest only preclude a cause of action

in breach of contract and not tort. Similarly, the words by

which the contract is stated to supercede "all prior

negotiations, representations or agreements" would operate, in my

view, to bar only a contractual cause of action based on such

pre- or extra- contractual representations.

419.

Unlike Carmen, the contract in this case does not contain

what might be termed a statement of "non-reliance". In my view

the case at bar is more analagous with BG Checo where the

argument that the "disclaimer clauses" in the contract barred a

tort claim was rejected.

420.

The contractual language prepared by UGG is also ambiguous.

The definition of contract is said to be the entire agreement and

- 172 -

it purports to supercede preceding events including the "bidding

documents". Yet as in BG Checo, the bidding documents in this

case were incorporated into the prime contract. Two things

follow from this: first, to the extent that the tender documents

were so incorporated, FCC is able to advance a breach of contract

claim for inaccuracies in the tender documents; and second, by

so incorporating the tender documents, the parties must be taken

to have attached considerable importance to the accuracy of the

tender documents and UGG and CWMM must have reasonably expected

FCC to rely upon the accuracy of statements contained in the

tender documents.

421.

This being the case, it seems to me that the parties

recognized the importance of the tender documents and any

exclusion of representations in the tender documents could only

be accomplished by clear language. There is certainly no "non-

reliance" language as found in Carmen.

422.

The policy reasons for the high threshold that the courts

will require a contracting party to meet before nullifying a duty

in tort is found in Edgeworth Construction, where McLachlin, J.

stated at pp. 214 to 215 as follows:

"The facts alleged in this case meet this

test, leaving the contract between the

contractor and the province to one side. The

engineers undertook to provide information

(the tender package) for use by a definable

- 173 -

group of persons with whom it did not have

any contractual relationship. The purpose of

supplying the information was to allow

tenderers to prepare a price to be submitted.

The engineers knew this. The plaintiff

contractor was one of the tenderers. It

relied on the information prepared by the

engineers in preparing its bid. Its reliance

upon the engineers' work was reasonable. It

alleges it suffered a loss as a consequence.

These facts establish a prima facie cause of

action against the engineering firm."

423.

And stated at pp. 220 to 222 as follows:

"The proposition that the only correct way to

bring a claim for design defects is by suing

the owner in contract, who then may claim

over against the design professional, is

similarly suspect. The result, in a case

such as this, would be that the contractor

would not be able to claim against anyone for

design defects. Since the province as owner

has excluded its responsibility for design

defects under the contract, the contractor

could not recover against it. So there would

be no claim over. Moreover, the notion that

there is only one right way to proceed - in

contract - undercuts the philosophy expressed

by this Court in cases such as Central Trust

Co. v. Rafuse, [1986] 2 S.C.R. 147, and BG

Checo International Ltd. v. British Columbia

Hydro and Power Authority, supra that

plaintiffs may sue concurrently in contract

and tort, provided the contract does not

negate the imposition of a duty of care in

tort.

One important policy consideration weighs

against the engineering firm. If the

engineering firm is correct, then contractors

bidding on construction contracts will be

obliged to do their own engineering. In the

typically short period allowed for the filing

of tenders - in this case about two weeks -

the contractor would be obliged, at the very

least, to conduct a thorough professional

review of the accuracy of the engineering

design and information, work which in this

case took over two years. The task would be

difficult, if not impossible. Moreover, each

- 174 -

tendering contractor would be obliged to hire

its own engineers and repeat a process

already undertaken by the owner. The result

would be that the engineering for the job

would be done not just once, by the engineers

hired by the owner, but a number of times.

This duplication of effort would doubtless be

reflected in higher bid prices, and

ultimately a greater cost to the public which

ultimately bears the cost of road

construction. From an economic point of

view, it makes more sense for one engineering

firm to do the engineering work, which the

contractors in turn are entitled to rely on,

absent disclaimers or limitations on the part

of the firm. In fact, the short tender

period suggests that in reality this is the

way the process works; contractors who wish

to bid have no choice but to rely on the

design and documents prepared by the

engineering firm. It is on this basis that

they submit their bids and on this basis that

the successful bidder enters into the

contract. The fact that the contractor may

agree to exempt the party inviting tenders

from liability for the design process does

not suggest that it thereby should be taken

to have exempted the engineering firm. In

the scheme of things, it makes good practical

and economic sense to place the

responsibility for the adequacy of the design

on the shoulders of the designing engineering

firm, assuming reasonable reliance and

barring disclaimers. The risk of liability

to compensate third parties for design error

will be reflected in the cost of the

engineers' services to the owner inviting

tenders. But that is a much better result

than requiring the owner to pay not only the

engineering firm which it retains, but

indirectly, the additional engineers which

all tendering parties would otherwise be

required to retain."

(emphasis added)

424.

This reasoning is apposite here. The engineering in this

case started in 1987. It was a large and complex project. It

would have been impractical if not impossible for tendering

- 175 -

contractors to do independant engineering to verify the adequacy

or completeness of CWMM's work at the time of tender.

425.

426.

UGG says that the contractual language bars a tort claim

against UGG. It says further that it would be an anomalous

result if such a bar operated to the benefit of UGG but failed to

protect CWMM, which was acting as UGG's agent.

In my view this submission fails to take into account the

reasoning of the Supreme Court of Canada in Edgeworth and the

other authorities referred to. These cases stand for the

proposition that an engineer in appropriate circumstances owes an

independant duty to a tendering contractor to ensure the accuracy

of bidding documents intended to be relied on by the contractor.

If an engineer is to be shielded from such liability by the terms

of either the bidding documents or a construction contract

subsequently entered into, clear and unambiguous language must be

found in the contract. Not only must there be explicit language

limiting the tort duty or waiving the right to sue in tort

between the contracting parties, the owner and contractor, but

that language must also clearly include and extend to the

engineer. This would give a contractor a clear choice between

doing its own engineering before bidding or alternatively having

a clear and unambiguous understanding that any bid would be

submitted in reliance on the owner's engineering on a non-

recourse basis. Absent such language in a large project of this

- 176 -

nature, I conclude that the parties must have intended tendering

contractors to rely on the accuracy of the bidding documents. I

also conclude that the terms of the prime contract do not not bar

FCC from advancing a claim in negligent misrepresentation against

either UGG or CWMM based on alleged errors or omissions in the

bidding documents.

(b)MISREPRESENTATIONS ALLEGED BY FCC

427.

Some basic principles concerning negligent misrepresentation

were set out in Queen v. Cognos Inc., [1993] 1 S.C.R. 87. At p.

125 Iacobucci, J. said:

A duty of care with respect to representations made

during pre-contractual negotiations is over and above a

duty to be honest in making those representations. It

requires not just that the representor be truthful and

honest in his or her representations. It also requires

that the representor exercise such reasonable care as

the circumstances require to ensure that the

representations made are accurate and not misleading.

Although the representor's subjective belief in the

accuracy of the representations and his moral

blameworthiness, or lack thereof, are highly relevant

when considering whether or not a misrepresentation was

fraudulently made, they serve little, if any, purpose

in an inquiry into negligence. As noted above, the

applicable standard of care is that of the objective

reasonable person. The representor's belief in the

truth of his or her representations is irrelevant to

that standard of care. The position adopted by the

Court of Appeal seems to absolve those who make

negligent

misrepresentations from liability if they believe that

their representations are true. Such a position would

virtually eliminate liability for negligent

misrepresentation as liability would result only where

there is actual knowledge that the representation made

- 177 -

is not true; the basis of fraudulent

misrepresentation".

(emphasis added)

428.

FCC contends that the representations made by CWMM and UGG

in supplying the tender documents were continuing representations

and that there is nothing in the Prime Contract which negates a

continuing duty of care. It points to two significant

representations made in the Letters of Intent which it says were,

in most cases, inaccurate or misleading. First, the Letters of

Intent contained references to estimated or projected delivery

dates of the preselected equipment and it says CWMM and UGG knew

or ought to have known that the equipment would not be available

for delivery by that date. Second, the Letters of Intent

contained representations as to the status of the shop drawings,

completion of which were essential for the manufacture of the

equipment. FCC says UGG and CWMM knew or ought to have known

that these representations were inaccurate or misleading but did

not advise FCC or take steps to ensure the representations were

accurate and not misleading.

429.

Clearly, FCC relied on the tender documents in tendering the

Project: after the Prime Contract award on February 10, it made

written commitments to the major subcontractors CMI and Ricketts-

Sewell on February 14 and it made commitments to all of the

preselected equipment suppliers on February 17. Over the next

months FCC learned that some of the material information

- 178 -

contained in the tender documents, particularly the Letters of

Intent, was inaccurate or misleading.

430.

The equipment delivery dates of "approximately mid-March"

were not accurate. At the time the contract was awarded on

February 10, the state of equipment design and procurement was

such that certain of the suppliers were clearly not going to be

able to deliver equipment by or close to the approximate mid-

March date. After the contract was awarded, Buhler advised

Whitaker that its delivery dates would be mid May and mid June.

This was significant since the work in the bin floor area in

which the Buhler equipment was to be installed represented

approximately 30% of the contract work.

431.

In his evidence Skodje said that if he had known of the

status of the Buhler deliveries before tender that: "We'd of

suggested that the completion commitments be rearranged. This

didn't coincide with the planned schedule." Skodje said in

respect of the February 6 Ebco letter, that had he known of the

Ebco letter before the tender was accepted on February 10: "We'd

of had to reneg on executing it. This again impacts on the

schedule completion." In cross-examination Skodje confirmed that

the following answer from his discovery was true:

"If between February 17th and March 1st Mr.

Campbell was cognizant of the fact that we

weren't going to get components until May, we

would have changed our whole approach. We

- 179 -

would have attempted to mitigate everyone's

costs with them. Instead we were required to

forge on full bore".

432.

433.

FCC developed its tender schedule in reliance on the tender

documents, including the Letters of Intent which reliance was

reasonable.

Based on the findings of fact I have made with respect to

the pre-selected equipment and the Letters of Intent, I conclude

that the representations made by CWMM and UGG in the Letters of

Intent were inaccurate or misleading, they were relied on by FCC

and CMI and that such was known or ought to have been known to

UGG and CWMM prior to the close of tenders. Accordingly, they

are liable to FCC for negligent misrepresentation.

FCC'S BREACH OF CONTRACT CLAIM

434.

After the award of the Prime Contract on February 10 FCC

took steps to mobilize on site. One of the first steps that

needed to be taken in accordance with the Letters of Intent was

to send purchase orders to the various preselected equipment

suppliers and then to arrange for the delivery of the preselected

equipment. After repeated requests, some, but not all of the

equipment files in the possession of CWMM were turned over to FCC

by March 23. Purchase orders were issued to the various

preselected equipment suppliers commencing March 20 and carrying

on until April 21. At

- 180 -

the site meeting of March 28 FCC advised CWMM and UGG that the

delay in turning over these files to FCC had affected the

schedule.

435.

After FCC's tender had been accepted by UGG on February 10,

FCC was advised by some of the preselected equipment suppliers

that their delivery might be later than that set out in the

Letters of Intent. That information was passed along to UGG and

CWMM by way of Whitaker's PrePurchase Vendors Lists. UGG and

CWMM were also aware of this through their direct dealings with

the equipment suppliers.

436.

Many of the equipment suppliers did not manufacture the

equipment on or before the delivery dates set out in the Letters

of Intent. I have found that the late delivery of the equipment

delayed FCC in the performance of the Work. The Letters of

Intent were incorporated into the Prime Contract.

437.

In BG Checo Iacobucci, J. (Sopinka, J. concurring)

discussed the effect of incorporation of tender documents into

the contract in issue in that case and said at p. 81:

"...Checo bases its claim for negligent

misrepresentation on the alleged

representation made in clause 6.01.03 of the

tender documents. Clause 6.01.03 of the

tender documents was incorporated verbatim as

an express term (also numbered 6.01.03) of

the contract between Hydro and Checo after

Hydro accepted Checo's tender. On Checo's

interpretation of clause 6.01.03 of the

- 181 -

tender documents, it is a representation as

to the state of the right-of-way. If clause

6.01.03 of the tender documents is such a

representation (and I am of the opinion that

it is, as I will discuss below), then clause

6.01.03 of the contract is an express

warranty as to the state of right-of-way."

438.

439.

Although Iacobucci, J. dissented on the issue of concurrent

liability in tort and contract, the majority of the court also

found liability against B.C. Hydro for breach of contract. (BG

Checo at pp. 21, 25).

CWMM had responsibility for the design of the preselected

equipment. The design was changed on a number of occasions for a

number of equipment suppliers. These design changes delayed the

manufacture of some of the equipment, most notably, the Nord-Sen

gates and the Buhler drag conveyors and gates. CWMM sent out its

employees to the manufacturing plants of most of the equipment

suppliers to observe the manufacturing and testing of the

equipment. In some cases the CWMM employees made suggestions to

or reached agreement with, the equipment suppliers on steps that

could be taken to expedite the manufacture and availability for

delivery of the equipment.

440.

FCC played no part in the design or manufacture of the

preselected equipment. Neither CWMM nor UGG expected that the

design or manufacture would have anything to do with FCC. After

the design had been completed and the equipment was manufactured,

FCC arranged for the delivery of the equipment. In arranging for

- 182 -

that delivery I conclude that FCC moved as expeditiously as it

could. I note that FCC did not warrant that the equipment would

meet the specifications set out in the Prime Contract. FCC's

assumption of the equipment suppliers' warranty on the equipment

did not commence until the date of Substantial Performance. Thus

CWMM or UGG were solely responsible for and controlled the design

and manufacture, and hence, I conclude the availability for

delivery of or defects in the preselected equipment prior to that

date.

441.

FCC says the representations which were made in the Letters

of Intent were carried forward into the Prime Contract becoming

an express warranty by UGG as to the state of the design,

manufacture and availability for delivery of the preselected

equipment. However UGG says that as at the date of tender and up

to the date of contract award the dates in the letters of intent

were in the future and were stated as "approximately mid-March".

However in my view there was, at the time of tender, if not an

express warranty, at the very least an implied warranty carried

into the prime contract that the state of the preselected

equipment as to design and procurement was such that a tendering

contractor could rely on the fact that the equipment would be

available on either the dates stipulated or sufficiently soon

thereafter so that the delivery would not materially delay the

contractor in the progress of its work. This warranty was

- 183 -

breached and FCC is entitled to succeed in its breach of contract

claim against UGG.

442.

On this project FCC was entitled to expect that the work to

be performed by other UGG contractors would not delay FCC in its

contract work. On a lump sum tendered project it must be that

the owner warrants, either expressly or by implication, that the

contractor will have a clear and unimpeded run at the work. In

this case I have found that PCL's delay in completing the

administration building and the late delivery of the preselected

equipment and drawing delays were responsible for delaying FCC in

the completion of its contract work until the end of November.

Such a delay constituted a breach by UGG of the contractual term

to which I have referred.

EXTENSION OF CONTRACT TIME

443.

In this case neither FCC nor CMI ever formally applied for

an extension of contract time (with the exception FCC's

application following the short labour disruption over the July 1

long weekend). FCC says that CWMM in its capacity as an

independant arbiter under the contract had a duty to extend the

contract time in view of the acts or omissions of CWWMM and UGG

which delayed FCC and CMI in completing their work. CWMM and UGG

say it was incumbent on the contractors to apply for an extension

of time, and having failed to do so, they are liable for their

- 184 -

respective failures to complete the work so substantial

performance could have been declared by August 31.

444.

I do not accept either submission. This project was marked,

particularly in its latter stages by some surprising

communications failures. As the August 31 deadline approached

and went by, CWMM continued to order extra work which FCC

accepted, as well as continuing its work under the original

contract. Yet at no time did FCC ever request an extension of the

contract time.

445.

In my view FCC cannot now argue that the contract time ought

to have been extended by CWMM in the absence of any request from

FCC. While FCC is entitled to advance a claim for damages

flowing from the defendants' negligent misrepresentations or

contract breaches as outlined above, I cannot conclude that the

failure of CWMM to extend the contract time, in the absence of a

specific request from the contractor, was a breach by UGG of the

contract.

446.

In my view of the contractual language in this case, it was

incumbent upon FCC to initiate a request for a contract extension

should it be desired. It was not the responsibility of the

engineer when the project had been apparently delayed, to

unilaterally issue such a time extension in the absence of a

specific request from the contractor. In the circumstances of

- 185 -

this case, I conclude that even if the delay was caused by the

owner or engineer, it was nonetheless incumbent on the contractor

to seek an extension of time. This FCC failed to do. Hence to

the extent that the delay in achieving substantial performance

was caused by acts or ommisions of FCC, it comes under a

liability to UGG for UGG's counterclaim, subject to the notice

provisions of the contract.

NOTICE OF CLAIMS BY FCC, CMI AND UGG

447.

There are two provisions in the Prime Contract which are

relevant to the claims of FCC and UGG. There are two mirror

provisions of the Subcontract which are relevant to the claims of

CMI. First, written notice of claim must be given by FCC under

GC 4.4 of the Prime Contract or by CMI under Clause 19 of the

Subcontract before FCC or CMI is entitled to extensions of time

under the Prime Contract or Subcontract, respectively. Second,

written claims of damage caused by the wrongful act or neglect of

FCC or UGG must be made "within reasonable time after the first

observance" by FCC or UGG under GC 22.2 of the Prime Contract or

by CMI under Clause 8 of the Subcontract before FCC, UGG or CMI

are entitled to claim damages for breach of contract.

448.

GC 4.4 and GC 22.2 of the Prime Contract are different

provisions and are mutually exclusive.

Clause 19 and Clause 8

of the Subcontract are different provisions and are mutually

exclusive. GC 4 and Clause 19 deal with extensions of contract

- 186 -

time and reimbursement for delay costs and not the more general

topic of notice of claims for damage which is dealt with in GC 22

and Clause 8.

449.

In this case FCC characterizes its claim not as a delay

claim, but rather as a claim for damages for breach of contract

and/or misrepresentation. CMI also advances a damages claim and

not a claim for delay or for an extension of the subcontract.

FCC never gave formal notice of claim under GC4.4 for an

extension of contract time during the course of the project (with

the exception of the time lost during the work stoppage on the

July 1 long weekend). Similarly, CMI never so applied under the

subcontract. Was such notice a precondition in order for FCC and

CMI to be able to advance their respective breach of contract

claims?

NOTICE FOR EXTENSION OF TIME

GC 4.1 provides:

450.

If the Contractor is delayed in the performance of the

Work by an act or omission of the Owner, Consultant,

Other Contractor, or anyone employed or engaged by them

directly or indirectly, contrary to the provisions of

the Contract Documents, then the Contract Time shall be

extended for such reasonable time as the Consultant may

decide in consultation with the Contractor. The

Contractor shall be reimbursed by the Owner for

reasonable costs incurred by the Contractor as the

result of such delay.

GC 4.3 provides:

- 187 -

If the Contractor is delayed in the performance of the Work

by labour disputes, strikes, lock-outs (including lock-outs

decreed or recommended for its members by a recognized

contractors' association, of which the Contractor is a

member or to which the Contractor is otherwise bound), ...

or, without limit to any of the foregoing, by a cause beyond

the Contractor's control, then the Contract Time shall be

extended for such reasonable time as the Consultant may

decide in consultation with the Contractor, but in no case

shall the extension of time be less than the time lost as

the result of the event causing the delay, unless such

shorter extension be agreed to by the Contractor. The

Contractor shall not be entitled to payment for costs

incurred as the result of such delays unless such delays are

the result of actions by the Owner.

GC 4.4 provides:

No extension shall be made for delay unless written

notice of claim is given to the Consultant not later

than fourteen (14) days after the commencement of

delay, providing however, than in the case of a

continuing cause of delay only one notice of claim

shall be necessary.

(emphasis added)

451.

Clause 19 of the Subcontract provides, inter alia:

"CLAUSE 19 - DELAYS AND EXTENSION OF TIME

If the Sub-Contractor is delayed in the

completion of the work by any act or neglect

of the Owner, Consultant, Prime Contractor or

any other Sub-Contractor of the Prime

Contractor or any employee of any of them or

by changes ordered in the work, then the time

of completion shall be extended to compensate

for such delays unless a longer or shorter

period of extension is established by mutual

agreement. If the Sub-Contractor is delayed

in completion of the work by labour disputes,

strikes, lock-outs (including lock-outs

decreed or recommended by a recognized

contractors' association for its members of

which the Sub-Contractor is a member), fire,

unusual delay by common carriers or

unavoidable casualties or, without limit to

- 188 -

any of the foregoing, by any cause of any

kind whatsoever beyond the Sub-Contractor's

control, then the time of completion shall be

foregoing, by any cause of any kind

whatsoever beyond the Sub-Contractor's

control, then the time of completion shall be

extended to compensate for such delay unless

a longer or shorter period of extension is

established by mutual agreement.

No such extension shall be made for delay

unless written notice of claim is given to

the Prime Contractor within five (5) working

days of its commencement provided, however,

that in the case of a continuing cause of

delay only one claim shall be necessary...

(emphasis added)

452.

Provisions virtually identical to GC 4 were interpreted by

Wallace J in Pacific Coast Construction Co. Ltd. et al v. Greater

Vancouver Regional Hospital District et al (1986), 23 C.L.R. 35

(B.C.S.C.) At p. 54 he said this:

"In my view GC 9.6 [4.4] only bars a

contractor's right to an extension of the

Contract. It does not refer to the

obligation of the Hospital District to

reimburse the contractor for any costs

incurred by it as a result of the owner-

caused delay as provided in GC 9.1 [4.1]".

453.

On this interpretation a failure to give notice under GC 4.4

of the Prime Contract or Clause 19 of the Subcontract does not

bar a claim for damages by FCC or CMI under GC 4.1, provided of

course the more general time requirements of GC 22 and clause 8

have been complied with. UGG and CWMM say the plaintiffs'

failure to give GC 4.1 notice is a bar to the recovery of their

- 189 -

delay claims. However, because GC 4 and GC 22 are mutually

exclusive, even if the plaintiffs failed to give GC 4 notice,

that is no bar to a claim under GC 22 for "...damage...because of

any wrongful act or neglect of the other party" provided the

requisite GC 22 notice was given. That notice is less stringent

than the 14 day time limit set out in GC 4. Under GC 22 notice

must be given "within a reasonable time after the first

observance of such damage".

454.

Of course a contractor's failure to give CG 4.1 notice will

result in it being held to the original completion date and its

failure to complete on time will, if no application for a time

extension has been sought and received, expose the contractor to

liability to the owner for the late completion.

455.

Neither CG 4.1 nor CG 22 nor the corresponding subcontract

provision specify the form of the written notice that must be

provided. Under GC 4.4 FCC must provide written notice of claim

of delay not later than 14 days after the commencement of delay.

In the case of a continuing cause of delay, FCC is only required

to give written notice of claim of delay once. There is no

requirement in GC 4.4 for any particular form of notice of claim

nor any requirement that FCC quantify the duration of or cost of

delay in the notice of claim.

- 190 -

456.

Because the contracts are silent as to the form of written

notice to be provided, the issue on notice is not the format that

any notice might have followed. Rather the issue is: Did FCC

communicate to CWMM and UGG with sufficient particularity so that

they either understood or ought to have understood that FCC and

CMI through FCC were advancing claims for the reimbursement of

the reasonable costs incurred by them as the result of owner or

engineer caused delay.

457.

However if notice under GC 4.1 was required, in my view the

documents in this case are replete with evidence of written

notice being provided by both FCC and CMI with respect to the

delays they said they were experiencing to their work as the

project proceeded.

(a)Incomplete or Changed Design

458.

Beginning in late February the number of holds on the bin

floor drawings began to delay the performance of the Work by CMI.

From the outset, CWMM and UGG were made aware of the delay caused

by the holds on the bin floor drawings at site meetings and

through letters. At the site meeting of February 21 the minutes

record that FCC sought clarification concerning the release of

holds on the bin floor drawings which CWMM promised would be

forthcoming.

- 191 -

459.

At the site meeting of March 2 the minutes record that FCC

required the release of bin floor drawings which were on hold.

The minutes also record that FCC was told by CWMM the situation

was "temporary" and was "currently being dealt with". At the

site meeting of March 7 the minutes record that the holds on the

bin floor drawings were becoming critical and the drawings should

be released. FCC requested that the drawings be released in

their current state by CWMM.

460.

On March 9 Marquis forwarded to CWMM CMI's letter of March 8

advising that production in Spruce Grove had been halted due to

the hold on the construction drawings for the bin floor

conveyors. On Campbell's copy of the letter he wrote "is this

still a problem?". On March 23 Marquis wrote to Campbell passing

along CMI's letter of the same date advising that CMI had been

delayed approximately two weeks due to drawing delays.

Subsequent minutes continued to highlight design deficiency

problems.

461.

The minutes of the June 15 site meeting record that FCC

turned over a new schedule that showed construction being

completed by September 4 and commissioning being completed by

September 11. The new schedule was conditional upon a number of

factors including:

- 192 -

That all "Holds" on drawings are removed

prior to June 30, 1989.

462.

463.

In my view this provided clear written notice to CWMM and

UGG that FCC would not be able to meet the schedule if all holds

on drawings were not removed prior to June 30.

The implications of drawing holds were clearly understood by

UGG and CWMM. In his evidence, Van Dyke confirmed that when a

hold is placed on a drawing, it means that a contractor is not to

do the work shown on that drawing. Van Dyke said that one of the

reasons holds were put on drawings on this Project was because

part of the drawing was being re-designed. Campbell testified,

"hold" means "if they're working on it don't do any work on it

until we transmit that clarification or change to them". At the

early stages of the Project, there were drawings on hold which

Van Dyke knew affected CMI's work.

464.

All holds on drawings were not removed prior to June 30.

Furthermore, revisions were made and some new drawings were

issued for construction for the first time after June 30. At

least 20 drawings were still on hold after June 30, including

drawings related to B1 and B2 conveyors and the other drag

conveyor supports.

- 193 -

465.

At least 23 CWMM Drawings were revised or issued for

construction for the first time after June 30. Some 126

Miscellaneous Drawings and Sketches were issued for construction

for the first time after June 30. At least 159 Electrical

Drawings and Schematics were revised or issued for construction

for the first time after June 30.

466.

467.

I conclude that timely notice was given regarding incomplete

or changed design delays.

(b)Preselected Equipment

Whitaker regularly updated and distributed his Prepurchase

Vendor Lists. These lists gave UGG and CWMM notice of the exact

stage of any particular aspect of the preselected equipment. As

noted above, by the middle of May FCC was no longer able to

rearrange its scheduled performance of the Work to ensure that it

could be completed by August 31. As soon as Whitaker had

prepared a new schedule, taking into account the new information

from Nordsen and Buhler in May, the schedule was given to UGG

along with a subsequent letter dated May 23 from Skodje providing

a written notice of claim respecting the preselected equipment.

468.

On March 14 the site minutes record:

4.012

Construction Schedule.

-

The overall construction schedule has

been posted on the meeting room wall.

- 194 -

-

An update will be made before month end

for all to review. A copy will be sent

to all parties.

ALL/NOTE

Note that all parties are expected and required

to follow or advise of any concerns.

469.

FCC's construction and commissioning schedules from May 23

on showed completion of the Work after August 31. Not only were

UGG and CWMM aware of the estimated delay impact at any given

time, they were aware of the cause of delay alleged by FCC. The

schedules and other documents given to UGG and CWMM on September

7 and October 5 demonstrated the overall impact of the delays in

delivery of the preselected equipment and of defects in the

equipment. In my view FCC gave timely notice of preselected

equipment delay.

(c)Administration Building

470.

A critical part of the Work included tie-ins between the

Terminal and the Administration Building. By the delivery of the

minutes of the meeting of June 15 and the schedule handed out at

the time, FCC gave notice to CWMM and UGG that unless the

Administration Building was available by July 17 the June

schedule would not be met. The Administration Building was not

available by July 17. Subsequently, numerous references were

made in the site minutes to the problems with completing the work

into the Administration Building. In my view, the June 15

minutes constituted a written notice of claim in respect of the

Administration Building.

- 195 -

471.

In my view both Campbell and Van Dyke believed, apparently

from at least July, that FCC would not meet the completion date

under the Prime Contract. FCC provided ample written notices to

CWMM and UGG respecting the causes, according to FCC, of the

delays.

472.

473.

FCC timely advised CWMM and UGG of the delay problems it was

encountering, and the fact that FCC attributed those problems to

UGG and CWMM.

Campbell recognized what he called a "paper war" developing

at the end of April. Van Dyke acknowledged that as of July 28 he

"anticipate[d] extension of contract wanted by FCC due to hold on

pulling chain and interferences due to BM problems, also expect

delay of job charges from FCC".

474.

In my view FCC complied with CG 4.4 to the extent that it is

not barred from advancing a claim under the contract for the

reimbursement of its costs incurred as a result of owner caused

delay.

NOTICE OF CLAIM OF DAMAGE

475.

Under GC 22.2 both FCC and UGG have an obligation to provide

a claim in writing to the other party "within a reasonable time"

of the first observance of such damage caused by the other party.

- 196 -

The onus rests with the party bringing a claim to show that the

party liable has breached the contract, and further to show, that

written claims have been provided under GC 22.2.

476.

GC 22.2, or a similar provision, was considered by the

British Columbia Court of Appeal in First City Development Corp.

Ltd. et al v. Stevenson Construction Co. Ltd. (1985), 14 C.L.R.

250 (B.C.C.A.), leave to appeal refused October 19, 1985, [1985]

2 S.C.R. xii, and in Doyle Construction Co. v. Carling O'Keefe

Breweries of Canada Ltd. (1988), 27 B.C.L.R. (2d) 89.

477.

In First City Development Corp. the owner sued the

contractor for damages caused by the delay of the contractor.

Article 36 of the contract in issue in that case was in material

respects the same as GC 22.1 and GC 22.2. Hutcheon, J.A. said,

in respect of Article 36:

"

I approach the construction of art. 36

with the proposition established by the

decided cases in mind: if a party to a

building contract is to be deprived of a

cause of action, this is only to be done by

clear words. Two citations are sufficient.

In Hancock v. B.W. Brazier (Anerley) Ltd.,

[1966] 2 All E.R. 901, [1966] 1 W.L.R. 1330

(C.A.), the English Court of Appeal held that

an article such as art. 17 was not clear

enough in meaning to take away from the owner

the right to sue in respect of structural

defects which were not discoverable within

six months.

The Ontario Court of Appeal, in Simpsons Ltd.

v. Pigott Construction Co. (1973), 1 O.R.

(2d) 257, 40 D.L.R. (3d) 47 (C.A.), held that

- 197 -

neither art. 17 nor art. 32 were sufficiently

clear to excuse the builder from liability in

an action brought within the statutory

limitation period. Article 17 provided for

corrections after final payment and art. 32

resembled art. 36 in the present case except

that claims were to be made not later than

the time of final payment.

The only limitation clearly stated in art. 36

is that by the words "not later than the time

of final certificate". I then turn to art.

27 for the meaning of "the time of final

certificate". For the owner the time is the

issue of the final certificate; for the

contractor the time is the acceptance of the

final certificate. When that time has

passed, all known claims are barred save

those excluded by art. 27. There is a

responsibility placed upon each party by art.

36 to give notice of a claim in writing

within a reasonable time but, in my opinion,

the failure to do so does not create a bar to

the making of a claim. The clear words that

are required to create that bar are not

present in art. 36.

The injunction to the parties in art. 36 is

of a kind similar to that to the contractor

in art. A-6: "The Contractor shall...make

such investigations as to the supply of

materials...as may be reasonably required...

and shall make such estimates as may be

reasonably required...."

The respondents filed a cross-appeal from the

paragraph of the formal order appealed from

adjudging that art. 36 applies to claims for

pure economic loss arising from breach of

contract by the contractor. Since I consider

that art. 36 by itself, and in so far as it

requires written notice to be given within a

reasonable time, is not a clause of time

limitation for the bringing of an action, I

do not find it necessary to examine the

merits of the cross-appeal.

478.

In First City, the trial Judge had found that:

- 198 -

"...the defendant was well aware that

completion of the contract was delayed. It

had every reason to believe that a claim

would be advanced....

The defendant does not say that its officers

were mislead. It does not say either that

the defendant acted to its detriment on any

representation or indeed expectation

initiated by the plaintiff that no claim

would be made. Had that been the case, the

defendant might have been able to raise the

defence of estoppel.

I say that the timing of the claim of the

plaintiffs is reasonable because the delay,

if any, and the timing thereof has not

prejudiced the defendant in the least".

First City Development Corporation Ltd. et al. v. Stevenson

Construction Co. Ltd. (1984), 8 C.L.R. 125 (B.C.S.C.), at p. 127.

479.

480.

The First City case was considered by the British Columbia

Court of Appeal in Doyle when construing contractual provisions

virtually identical to GC 22 of the Prime Contract.

Craig, J.A. focused on the issue of prejudice raised in

First City Developments and said at p. 103:

"...I think that the judgment of this court

in the First City case can not justify the

contractor ignoring the express conditions of

G.C. 22.2. The meaning of G.C. 22.2 is

obvious and comes patently within the "clear

words" principle.

To hold that a contractor is not barred from

presenting a claim unless he gives notice of

the claim within a reasonable time would

render G.C. 22.1 and G.C. 22.2 nugatory. The

trial judge was correct in relying on the

- 199 -

extract from Hudson to which I have referred

in holding that reasonable notice in the

circumstances was a condition precedent to a

claim by the plaintiff.

(emphasis added)

481.

482.

The focus for the Court of Appeal consideration in Doyle was

the exception created in First City Development. That is, was

there prejudice by the failure to give notice.

Whether or not a party has suffered any prejudice is

determined in light of the purpose for requiring notice.

Locke, J.A. in Doyle stated at p. 111,

What is a reasonable time must surely be

determined by reference to all relevant

circumstances... The provision for notice is

useless unless it gives some particulars to

the owner as to what the complaint is. It

must surely also be given in enough time so

that he may take the guarding measures

pointed out in Corpex if he so desires. An

early notice also leaves the owner free to

negotiate either under this provision or

under any other provision of the contract

which may assist in the resolution of the

problem. From the standpoint of the

contractor, he may not, of course, know

precisely what the monetary effect of

accumulation of delays might bring about, but

an early notification of his concern will

also enable him to get himself into a

negotiating position as to the method of

solution of the problem, and to raise his

concerns under the contract...

The purpose of the notice is to give the

owner an opportunity of considering his

position and perhaps taking corrective

- 200 -

measures, and he is prejudiced by not being

able to do it".

483.

Craig, J.A., (Macdonald, J.A. concurring) at p. 96, adopted

the statement of the law set out in Hudson's:

"Building and engineering contracts

frequently contain provisions requiring a

contractor to give notice within a reasonable

time of events occurring which he considers

may entitle him to claim additional payment

under the terms of the contract. Since the

purpose of such provisions is to enable the

employer to consider the position and its

financial consequences, and by cancelling or

authorizing a variation, for example, he may

be in a position to reduce his possible

financial commitment if the claim is

justified, and since special attention to

contemporary records may be essential either

to refute or regulate the amount of the claim

with precision, there is no doubt that in

most cases the court will be ready to

interpret these obligations of the contractor

as conditions precedent to a claim and

failure to give the notice may deprive the

contractor of all remedy".

(emphasis added)

484.

Doyle and First City Development Corp. demonstrate that

the form of notice is not important. What is important is the

substance of the notice. Whether or not the substance of the

notice is sufficient must be determined in light of the purpose

for giving notice. Proof of notice is a pre-condition to

recovery by FCC or CMI of their claims or by UGG of its

counterclaim. As Macdonald, J.A. said in Doyle at p.105:

- 201 -

"For the reasons given by Mr. Justice Craig,

I hold that failure to give reasonable notice

in the circumstances of this case was a

condition precedent to the claim of the

contractor".

(emphasis added)

485.

In W.A. Stevenson Construction (Western) Limited v. Metro

Canada Limited (1987), 27 C.L.R. 113 (B.C.S.C.), Locke, J.,

examined what the purpose of notice was in that case. He said at

p. 182:

A reading of the minutes is very revealing:

they were obviously regarded by everyone as a

method of formally communicating their

concerns to the other party. Reading them is

rather discouraging: in almost parrot-like

fashion entries, the contractor's concerns

regarding access to the side, structures,

utilities both under and above ground, and

topics such as strikes or weather, appear

with monotonous regularity seemingly from

beginning to end...On consideration of all

the minutes and the letters, I find that all

claims in this action are covered.

486.

487.

Interestingly, Locke, J. considered the trial judgment in

Doyle in coming to this conclusion. He later sat on the panel

which dismissed the appeal from the trial judgment in Doyle.

In Doyle, Locke, J.A. considered whether the trial judge's

conclusion that site meeting minutes did not provide adequate

notice of a claim for damages was palpably wrong. He began by

discussing the purpose of notice. He then discussed whether the

- 202 -

particular site meeting minutes in that case disclosed enough

information to satisfy the purpose of giving notice. On the

particular facts, Locke, J.A. said:

"

The grumblings of this contractor,

recorded though they may be in site minutes,

display no intention to claim until December

1983. Even then, no claim was actually

advanced, but intent was indicated. But no

details were given: an owner would be hard

put to know exactly what it is to meet, and

hence what it is to do".

In this case, on each item for which FCC alleges delay, CWMM and

UGG knew exactly what they had to meet and hence what to do.

488.

Doyle is authority for the proposition that the form of

notice is not governing. Rather, the issue is whether the notice

contains enough information to satisfy the purpose test. In my

view, FCC did provide to UGG sufficient notice within a

reasonable time to satisfy the purpose test and it complied with

GC 22..

489.

On May 23 FCC advised UGG and CWMM of the delay impact of

the Buhler deliveries, and UGG took corrective action based on

that advice. As he said in cross-examination, Campbell

understood from this May 23 letter that FCC was saying if it

incurred additional construction and overhead costs because of

the matters set out in the letter, FCC was going to claim them.

- 203 -

490.

On June 15 FCC advised UGG and CWMM of problems that the

delay in the delivery of the Buhler equipment and the Nord-Sen

equipment were causing, gave notice of the problems that the

holds on the drawings were causing, gave notice of the problems

that the delay in the completion of the Administration Building

were causing, and gave notice of the problem respecting the

installation of the dock progressors.

491.

On July 7 notice by letter was given to UGG and CWMM

respecting a labour shut-down due to the dock progressors. This

was in addition to earlier notices provided in the minutes of

April 25 meeting and May 16 minutes.

492.

493.

On August 10 a detailed list of areas holding up Ricketts-

Sewell in the performance of its work was provided to UGG and

CWMM.

At the August 31 site meeting further explicit details were

given to UGG and CWMM concerning the delay to FCC and its causes.

On September 7 FCC, at a meeting with UGG and CWMM, explained in

some detail the anticipated costs to UGG of finishing late and

provided a cost/benefit analysis to UGG by outlining the benefits

to UGG if UGG paid for the acceleration of the work.

494.

On September 14 FCC wrote to CWMM and provided further

analysis as follows:

- 204 -

"Further to the site meeting of September 7, 1989,

attached is a copy of the material that was tabled for

discussion at that time. It is meant to illustrate the

schedule slippage between the anticipated delivery date

of major components and the actual date that the

components were received. It also illustrates the

compounded cost effects that the various scenarios

would have on the overall project.

These costs represent the effect of acceleration

through August and September and do not reflect cost

impacts as a result of delays.

As expressed we are looking for cost reimbursement for

the additional costs that are the result of

accelerating the program in order to meet the earliest

possible completion date.

We trust that you find the attached in order and that

we may resolve this issue as expeditiously as

possible."

495.

Discussions concerning FCC and CMI's delay and impact cost

claims continued throughout the fall of 1989. On October 5 more

detail was provided to UGG and CWMM concerning the causes of

delay to FCC and the potential extension of time required. On

November 21 FCC delivered to UGG and CWMM, CMI's delay claim and

FCC's estimated delay quantum to the end of November.

496.

Perhaps even more importantly, FCC delivered meeting

minutes, construction and commissioning schedules and updated

Prepurchase Vendor lists to UGG and CWMM on a regular basis,

keeping both CWMM and UGG completely apprised of the status of

the work, prospective completion dates including commissioning,

and causes of delay.

- 205 -

497.

The primary cause for the initial delay was the delay in the

design and manufacture of the preselected equipment which

prevented FCC from arranging timely delivery of the equipment.

CWMM and UGG were fully aware of the status of the design and the

manufacture of that equipment and understood the effect of the

delay in delivery on the installation of the equipment.

498.

In my view FCC provided written notice compliant with the

contract and it is accordingly entitled to recover its provable

damages representing its reasonable costs incurred as the result

of the delays as provided in GC 22.

NOTICE OF DELAY BY CMI

499.

Equipment delays were identified as a concern by CMI at an

early stage in the project. On February 27 Popowich wrote to

Marquis enclosing a "points list" pertaining to FCC's tender

schedule. The points list notes that the "present schedule" for

installation of the distributors would not allow CMI sufficient

time to fabricate and install spouting before July 31, 1989.

500.

Several further examples of notices of delay given by CMI to

FCC, UGG and CWMM have been referred to above, under the topics

of specific delays. Three examples are repeated below:

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501.

502.

503.

504.

On March 8 and March 12, CMI notified FCC that holds that

had been placed on design information had begun to delay CMI's

progress.

On March 23 CMI again wrote to FCC, notifying FCC that its

fabrication of bin floor spouting had been delayed by two weeks

due to delays in the release of design information.

CMI also issued 91 RFC's, many of which, such as RFC 24 and

RFC 89 for example, identified potential or actual delays,

generally due to the lack of design information.

In my view, CMI's notices of delay to FCC coupled with the

delivery of its formal claim on November 11 fulfilled the

requirements of Clause 19 its Subcontract. The notices were

timely given in writing and were specific to the particular

causes of delay being encountered. FCC passed on these notices

to CWMM and UGG.

NOTICE BY UGG OF ITS COUNTERCLAIM

505.

UGG gave written notice of its counterclaim January 30,

1990. As MacKay and Van Dyke testified, this letter was the

first "formal notice of a claim for damages that was given to

FCC".

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506.

507.

However as early as September 13, 1989, the defendants were

considering not only the CMI overtime claims forwarded to them by

FCC but also the economic loss that UGG was going to suffer

because of the later than planned completion.

On September 13 a meeting was held attended by

representatives of CWMM and UGG to discuss the FCC and CMI

claims. MacKay, Choukalos, Campbell, Van Dyke and Pope attended

the meeting. Prior to the meeting Campbell prepared a document

as a "response to 'proposed' claim against United Grain Growers

for delay in completion". The note contained three options which

were discussed at the meeting. The first option was to listen to

FCC and advise FCC that UGG would have to consider the facts and

adjourn and meet again. The second option was to listen to FCC's

proposal and discuss with them whether there was a real impact of

late delivery. The third option was to listen to FCC and to tell

them that they were late because of their own problems. The

notes recorded:

"At present, FCC have a reprieve due to the

dock work progress. On the given day that

the dock is ready and UGG is able to ship -

UGG will pursue liquidated damages charges

against FCC".

508.

The reference was to the dock work being done by JJM, which

was not completed to a point where shipping could take place

until the end of January, 1990.

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509.

At the beginning of his notes of the same meeting, Van Dyke

wrote:

"Discuss response to FCC re contract

schedules. What UGG position - see no

possibility for September 30 completion -

dubious Oct 31 want to know UGG's

position/approach- discussed options (PJC and

info)."

The options referred to in Van Dyke's memo were those contained

in the typed notes prepared by Campbell.

510.

At the September 13 meeting Choukalos asked if there was a

strategy or policy and MacKay replied that the number one policy

was to get the project done. He said "will admit some

prepurchasers late, but can't feel lateness impacts on CMI and R

& S". MacKay testified that he had not done any study on the

impact at this time, nor had anyone else. At the same meeting

Campbell suggested obtaining a legal opinion, apparently with

respect to FCC's contract obligations concerning the letters of

intent. One complainant concerning FCC and its conduct during

the course of the meeting was Choukalos, who had very little to

do with the Project on a day to day basis and who attended only

one site meeting. However Choukalos nonetheless advised the

attendees at the meeting, correctly in my view, that they "must

tell Skodje he has not fullfilled his obligations and has not met

his obligations and has misled us with his schedules". Choukalos

gave evidence that he felt a letter should be sent to FCC to put

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the owners opinion of where they stood in writing, so all parties

would know.

511.

On September 19 during a meeting entitled "discussion at

Bill's Wed aft." Van Dyke noted "owner to write serious letter to

FCC"... "Contractually - normally should indicate lack of

progress and how FCC intends to bring job back on schedule". Van

Dyke also noted, "Skodje not feeling uncomfortable - no one

'swing' at him - need advice as to how firm UGG position is". In

my view, these were references to the strategy adopted by UGG at

the time not to tell FCC its real opinion concerning the delay

and not to give any notice under the Prime Contract. Van Dyke

also wrote

"owner late delivery

-Samples and changes to sampler system was

completely designed

-Drag conveyor section designs were late..."

512.

On a number of occasions at that meeting Choukalos and

Campbell suggested that UGG should get legal advice as to their

position concerning the FCC and CMI claims. The notes record a

discussion of the various options set out by Campbell and in

particular "question as to what we do tomorrow give example or

stall or what". At the conclusion of the meeting after Campbell

suggested a combination of option 1 and option 3, MacKay set out

the "strategy of 'no response'". On the evidence that strategy

of no response was adopted and continued until January 31, 1990,

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one month after CWMM had declared substantial performance and the

time when the work on the dock was completed and when UGG was in

a position to start shipping.

513.

On October 5 a meeting took place at UGG's office attended

by MacKay, Pope, Van Dyke, Campbell, Nicholls, Skodje, Marquis

and Whitaker. At that meeting documents were presented to UGG

and discussed including Whitaker's final Pre-Purchase Vendors

List, the tender schedule, and a separate sheet for each of the

prepurchased equipment suppliers showing tender delivery versus

actual delivery. A schedule comparison between the tender

schedule and the equipment delivery impact, was also provided,

based on 45 hours per week per shift and based on 37½ hours per

week per shift (i.e. if no more premium time was worked). The

schedule showed actual installation of mechanical equipment

extending to September 11, electrical installation projected to

extend to the end of December, spouting installation projected to

extend to the end of October, dust control projected to extend to

the end of November, pneumatics installation and hydraulics

projected to extend to the end of November, with testing start-up

and commissioning extending to the end of December.

514.

There are two sets of notes of the meeting of October 5. Van

Dyke made notes at the time and MacKay made notes at a later

date. In respect of any differences between the notes, Van

Dyke's are to be preferred, since he made them at the time.

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MacKay apparently made his notes sometime in January, 1990 or

later. At that meeting MacKay confirmed, as Van Dyke noted,

"Same as we have discussed in past Ted - just want project done.

Have never intended to jeopardize project so haven't gone to

finger pointing - so no letter - jeopardizes project". Just

before MacKay said this Pope said "UGG's basic stance is we

recognize project simply as LATE".

515.