January 27, 2012

City of Hamilton liable for over $1M in damages to contractor

The City of Hamilton has been ordered by the Ontario Superior Court of Justice to pay $850,866, in damages to Bre-Ex Limited for “inept” management of a 2001 contract to fix a leachate problem at the Glanbrook landfill.

The damages do not include pre-trial interest or legal costs. Once added, the City will likely be on the hook for over $1-million dollars.

(Note: Bre-Ex Limited of London, Ontario is not related to the infamous Bre-X group of the 1990’s gold scandal fame)

Bre-Ex was the lowest bidder for the late 2001 contract to install a new drainage system

The City awarded the contract to Bre-Ex on December 11, 2001. However, the City did not inform Bre-Ex until a meeting on January 24, 2002.

Bre-Ex planned to complete the work in December, January, and February. The delay required them to review their plan and split work over two winters. There was a further delay as the City and Bre-Ex negotiated terms.*

Bre-Ex went to court for damages resulting from the delays.

In his ruling, Justice H.A. Rady ruled the City was at fault for damages finding “no real explanation for the delay was offered by the City although I have the impression that the City was in a state of disorganization as a result of some recent municipal reorganization.”

The new City of Hamilton was created January 1, 2001 as the result of a forced merger of six municipalities.

Justice Rady suggests City staff might have mislead City Council by not disclosing information:

I am very suspicious that those individuals from the City involved in discussions with [Bre-Ex president] Mr. Brekelmans were attempting to find a way to deal with the plaintiff’s delay claim without disclosing the reason to City Council, namely the City’s responsibility for the delay

Justice Rady notes a request from City staff to Council in early 2003 to increase the budget of the project by $569,240 ($532,000 plus GST).

The draft proposal stated the increase was “due to project delays.” After review by senior city staff, including manager of waste disposal John Mater, this was changed to funding expanded works.

Justice Rady notes the project was 97% complete at the time and “sufficient funds were available in the contingency to complete any extras.”

Council was never informed of the delay and approved $569,240 for ‘expanded works’ on May 28. 2003.

Staff requested Bre-Ex to submit a claim for delays, they originally submitted for $550,000. Bre-Ex president Brekelmans testified that he was directed by Mater to revise the figure to $532,000 plus GST.

On July 10, 2003, City staff generated the change order and mailed it to Bre-Ex. The funds were never released but the charge was neither countermanded or reversed. (I’ve emailed the City asking what became of these funds)

City staff provided contradictory statements about the events leading to the approval and the issuing of the change order to Bre-Ex. They all stated the $569,240 was not for delay costs to Bre-Ex. The judge did not rule on the validity of the statements, as the ruling did not hinge on this point.

Justice Rady closed his discussion of these events noting:

One must really wonder why the exercise was undertaken at all when the contract was rapidly approaching final completion and there were sufficient funds in the contingency to cover the cost of the additional works.  One must also wonder why the purchase order was never reversed, if the payment became unnecessary.  The City offered no explanation.

The two parties will be return to court in two weeks to argue how much of Bre-Ex’s legal costs should be paid by the city.

NOTE: The City of Hamilton’s general managers of public works and finance were both in negotiations with the city’s transit union and unavailable for comment Friday. A special note that city communications staff did their best to assist and must be commended for their stellar efforts.

**CORRECTION: **The first to third revisions of this article incorrectly stated Bre-Ex planned to complete work over two winters. In fact, they originally planned to complete during one winter. When the miscommunication occurred, they were unable to follow their original plan. I regret the error.