Ontario Construction News staff writer
Infrastructure Ontario (IO) and Metrolinx have filed a massive volume of documentation with the Ontario Superior Court of Justice as they seek leave to appeal a judge’s ruling in May that Crosslinx Transit Solutions can extend the “substantial completion” deadline for the $5.5 billion Eglinton Crosstown Light Rail Transit (LRT) project.
The judge had ruled in favour of the contracting consortium in its assertion that the pandemic reflects an “emergency” for construction scheduling and costs.
A 33-page factum filed on June 18 outlines several legal issues that the public agencies say Justice Markus Koehnen had misinterpreted in his May 17 decision. The document is only part of the legal filing, which comprises well more than 1,000 pages.
Koehnen had ruled against Infrastructure Ontario (IO) and Metrolinx, who had argued that the matters should only be litigated after the substantial completion actually occurred. The consortium building the project brought the case to court last fall, with three days of hearings in February.
“There is good reason to doubt the correctness of Justice Koehnen’s decisions and the issues raised are important both in respect of the effective use of contractural dispute processes on major construction projects and in respect of protecting settlement communications,” lawyers for the agencies wrote. “As well, there are conflicting decisions on the privilege issue and the matter is of general importance.”
The agencies assert that Koehnen had relied on an “email relating to broader without prejudice commercial discussions involving other claims,” which the public agencies “had claimed settlement privilege over.” This email related to the claim that Metrolinx and IO had “frustrated the dispute resolution procedure by refusing to move the negotiations forward in the absence of documentation.”
They also assert that “Justice Koehnen’s decision reflects a misunderstanding of key concepts and defined terms in the project agreement that are fundamental to the effective functioning of the P3 model.
“Staying this Application would not have described project Co. of its rights to pursue its claim through the Dispute Resolution Procedure,” the factum says. They also assert the judge misunderstood the concept of Substantial Completion as defined in the contract, “missing the Longstop Date and Senior Creditors’ Longstop Date.”
In a June 1 statement, IO said that “as public agencies entrusted with taxpayer dollars it is our responsibility to ensure that any costs paid for by the public are properly substantiated before payments are made.
“We are committed to work with all of our contract partners to discuss the challenges and costs that have occurred over the past 15 months – recognizing that neither the Province, nor its partners, caused the pandemic,” the statement says.
“On P3 projects we have brought to market since the outbreak reached Ontario last year, we have already established a regime in our contracts that defines a new approach to pandemic risk. That regime will be used on all projects being procured now – including Ontario’s ambitious transit plan.
“Our goal has always been, and remains, building great partnerships that deliver great public projects.
Justice Koehnen’s original ruling
Crosslinx, a consortium of Aecon, EllisDon, SNC-Lavalin and Dragados, won the contract well before provisions of the new Ontario Construction Act went into effect – meaning lien claims and notices must follow the earlier Construction Lien Act. Construction started in 2011, long before the COVID-19 pandemic started tearing around the world last year.
In a commentary on the decision published on May 25, lawyers from McMillan observed the decision “raises three important points parties should consider in assessing the contractural obligations in a P3 project:
- “While all parties to P3 contracts are sophisticated entities with independent legal advice, the words of the agreement need to be read with the project process in mind – namely, the “partnership” part of a P3 means that collaboration should play a role in addressing new issues and disputes.”
- “Once-in-a-lifetime events like a global pandemic should not be seen as a ‘normal’ risk allocated to a party through general risk language.
- “While the logic of deferring disputes until Substantial Completion may make sense for certain types of matters, deferring disputes about rights related to Substantial Completion itself should be dealt with as they arise.”
Metrolinx and IO, the provincial agency overseeing transit expansion in the GTA, had refused to declare COVID-19 an emergency and argued Crosslinx was responsible for extra costs during the crisis, The Toronto Star reported. The agencies also wanted to be able to enforce financial penalties against the company for missing the opening date spelled out in the LRT contract.
“The judge had harsh words for Metrolinx and Infrastructure Ontario in his 25-page ruling, writing that the agencies’ attempts amid the pandemic to penalize Crosslinx for missing the construction deadline gave the company incentive ‘to cut corners and imperil public health and safety,’ The Star reported.
In his decision, the judge ruled that while Metrolinx claims safety is its top priority, its interpretation of the LRT contract was “neither a fair nor reasonable approach,” and would have reduced its “ostensible concern about worker safety to nothing but window dressing.”
CrossLinx spokesperson Kristin Jenkins said in a statement that the consortium is satisfied with the decision. “Proactively and diligently protecting our workforce and the community from COVID-19 means we have incurred additional costs and delays,” she wrote.
“Not only does today’s ruling confirm these very real impacts of COVID-19, but it also provides the path for Crosslinx, Metrolinx and Infrastructure Ontario to fairly resolve these issues so that the project can be completed as quickly as possible.”
The Crosstown had faced problems long before COVID-19. In February 2020, Metrolinx acknowledged it wouldn’t open by its contractual completion date of September 2021, despite a $237-million payout to Crosslinx that was supposed to keep the project on track, The Star reported.
The company declined to tell the newspaper how much it will press the province for in compensation for COVID-19 costs, but last October it estimated the crisis had it had incurred $134 million as a result of workplace safety measures, supply chain problems, and increased absenteeism, and it expected that number to rise.