June 23, 2014
The 64-page judgment by Superior Court Judge Donald Mackenzie concerns the Lawsuit initiated by Urbacon Buildings Group Corp. (Urbacon), contractors for the new city hall and courthouse. The action was a wrongful dismissal case in which the City of Guelph fired the contractor before the contract was completed September 19, 2008.
The judgment is not the easiest to follow due to the complexity of the case and the various influencing elements. GrassRoots Guelph is dedicated to parsing the judgment with commentary following official statements so that viewers may reconcile the importance of this decision.
This lengthy and thorough judgment clearly finds that the City of Guelph wrongfully dismissed Urbacon and is liable for damages.
The most interesting part of the judgment is the disposition. In it, the Judge clearly and unequivocally places the blame and a framework of pending costs, on the city for attempting to orchestrate the sudden dismissal of Urbacon for it own benefit.
He says the $44,520,000 contract, exclusive of the GST, was signed July 4, 2006. The Judge stated the contract, drawn up on a form used by the Canadian Construction Association, was “comprehensive as one might expect for an undertaking of the nature and extent of the Project.”
This statement negates the comment by the Mayor, following release of the judgment. She charged the original contract, passed by the Kate Quarrie administration, was “poorly worded”.
The Judge is quoted:
“In the result, the notice of events of default issued by MTA under the direction or orchestration by Guelph is invalid and thereby negates any justification by Guelph of its termination of Urbacon. The failure by Guelph to perform its obligations in good faith under the Contract invalidates any justification for Guelph’s termination of Urbacon on the Contract.”
This paragraph sets the tone for the decisions contained in the judgment.
The reference to the MTA is the architecture firm, Moriyama and Teshima, who, both parties agreed, were the neutral consultants monitoring the progress of the Project.
“The Consultant will visit the Place of the Work at intervals appropriate to the progress of construction to become familiar with the progress and quality of the work and to determine if the Work is proceeding in general conformity with the Contract Documents.
“The Consultant will be, in the first instance, the interpreter of the requirements of the Contract Documents and shall make findings as to the performance hereunder by both parties to the Contract. During the progress of the Work, the Consultant will furnish Supplemental Instructions to the Contractor with reasonable promptness or in accordance with a schedule for such instructions agreed to by the Consultant and the Contractor.
“The Consultant will prepare Change Orders and Directives.”
According to testimony given during the 40-day trial over three months, the Judge was critical of the role of the MTA in performing its responsibilities as neutral consultant hired to expedite the Project and being independent.
In the shadowy way the Farbridge administration operates, there appeared on the surface to be no one on council or senior staff overseeing the 29-month project that was supposed to be completed by December 18, 2008. Instead, a middle manager named Murray McRae was the city’s point man. He is no longer employed by the city.
Guelph’s Chief Administrative Officer, Ann Pappert, has stated that the person responsible for the Urbacon firing was former CAO Hans Loewig who, she claimed, had the authority to cancel the contract without consulting the council.
The record shows that Mr. Loewig received a four-year contract as Guelph’s CAO two months following the firing of Urbacon. His new contract made him the highest paid public servant in the City starting at $198,000 per year plus expenses. His contract also included an unusual clause that permitted 12 weeks of unpaid leave plus his regular vacation.
Mr. Loewig resigned a month before the trial began and did not testify.
Pappert’s statement further adds fuel to the fire that public trust in the administration has been permanently shattered. That includes an abdication of moral authority and fiduciary responsibility that has been trashed.
Here is more from the judgment:
In the fall of 2007, Urbacon notified the MTA and city of issues that breached the original contract. These included:
1. Some of the design drawings and specifications were vague and incomplete;
- Other design drawings and specifications conflicted with each other;
- The design drawings required substantial changes or improvements; and
- In addition, Urbacon complained that Guelph created many substantial changes in the scope of Work and most importantly,that Guelph and/or the Consultant refused or neglected to give appropriate direction or authority to proceed with any changes in a timely fashion, thus contributing to delays on the Project.
Guelph agreed to pay to Urbacon an additional $534,600.00 representing damages occasioned by the delays in question, and also agreed to extend the substantial completion date for the project by 119 days from the original substantial completion date.
This portion of the judgment clearly details the failure on the part of the city to manage its responsibilities costing an additional $534,600 due to the administration’s lack of action to deal with construction problems. Many of these problems were created by a tsunami of change directives and change orders initiated by the city.
Urbacon, for its part, blamed the flood of change orders and lack of decision-making by the city staff, for the constructions delays. Based on the evidence, the Judge agreed.
The nature of these changes in the original contract has never been revealed. Some observers claim that most were design changes to accommodate specific environmental standards.
The Farbridge administration has spent millions in its two terms of office on environment issues including, waste management, bicycle lanes on major routes, underground thermal heating and cooling systems, upgrading building codes and increasing development fees by some 100 per cent.
It is now obvious it ordered many changes to the original contract to accommodate excessive environmental features. What is now acutely apparent the person or persons responsible for these changes are not known and were not revealed in the trial.
What is this going to cost the citizens of Guelph?
Step one is the Judge has asked both parties to negotiate a settlement of the costs. If that negotiation fails then a separate trial will be held in October to settle the costs.
Here is an estimate of the costs and liability facing the City of Guelph:
* To Urbacon, the cost of damages and breach of contract to the contractor who sued is $19 million. In view of the decision of the Judge, that figure could escalate.
* The costs of the 40-day trial. Estimate $2 million
* The legal costs of both the city and Urbacon, estimate $5 to $8 million depending on whether the city decides to appeal the judgment.
* Costs of city staff preparing documents and reports over a four-year period are Impossible to estimate.
* Cost of two contractors hired to complete construction of the new city hall and the conversion of the old city hall into a provincial offenses court. Cost is unknown and not revealed at trial.
* Dismissal and retirement payments paid to city staff involved in the case. Again, not revealed to the public
* Payments to subcontractors who lost their jobs when Urbacon was fired and were owed payment for work, estimate $5 million.
* Cost of interest based on the disposition of judgment commencing March 31, 2014. Estimating liability to the city of $30 million, the interest cost at 5 per cent is $4,109 per day. That interest from March 31 to June 23, the day council meets in camera to review the judgment is 84 days, equaling $345,205 in accumulated interest. The cost of interest alone could reach $1 million before the issues are all settled possibly next year.
* Miscellaneous costs, estimate $500,000 over six years of litigation.
These costs could reach as much as $30 million by the time the dust settles.
That could result in increasing the cost of the new city hall and provincial offenses court to more than $75 million. This epic episode of mismanagement and dereliction of responsibility by council is one of the reasons that GraasRoots Guelph was formed to return control of the city back to the people.
How is the city going to pay for this? It will be forced to borrow to fulfill its obligations arising from the decision. This also increases the costs of the trial outcome.
How is it possible that our elected council at the time, failed to recognize and understand the fallout of the decision to fire the contractor? To claim that council was not involved and were unaware, is a dereliction of their responsibility to the citizens.
That 2007 to 2010 council consisted of Mayor Farbridge, Bob Bell, Kathleen Ferrelly (retired); Vicky Beard (defeated 2010) Ian Findlay; Maggie Laidlaw, June Hoffland; Mike Salisbury (defeated in 2010, running gain in 2014), Gloria Kovach (retiring 2014); Leanne Piper, Lise Burcher; Christine Billings (retired) and Karl Wettstein.
Orders shall issue as follows:
- Declaring that the termination of Urbacon under the Contract by Guelph was wrongful and invalid;
- Guelph shall pay to Urbacon such damages arising from Guelph’s wrongful and invalid termination of Urbacon, upon assessment of the same on completion of the second phase of this proceeding;
- Guelph shall pay to each of the sub-trades (lien claimants who have proven their claims) the amounts found by this Court to be due and owing to each of them;
- The damages and amounts described in paras (2) and (3) above, shall bear interest thereon in accordance with the Courts of Justice Act from the date such damages and amounts are fixed;
- Costs shall be determined in accordance with the judgment herein dated March 31, 2014;