Ontario bans contractor after problems with North Bay-area dam project

An Ontario construction company is embroiled in a lawsuit with the province over the construction of a North-Bay area dam – and the province’s decision to bar the company from bidding on future contracts.

The centre of the dispute is a $6 million contract awarded in 2019 to HugoMB Contracting Inc. to replace the Tilden Lake Dam, north of North Bay.

Tilden Lake Dam is located at the southern outlet of Tilden Lake, about 30 kilometres north of North Bay, in Lyman Township.

It was built in 1961 and comprises a 4.4-metre high concrete gravity structure with two stop log sluiceways and earth embankments at both sides.

Dissatisfaction with HugoMB’s work led the province to terminate the contract in March 2021. Then in August of that year, HugoMB was barred from bidding on any provincial contracts for two years.

In response, HugoMB triggered a clause in its Tilden Lake contract that sent disputes under the contract to arbitration for resolution.

It submitted several issues for arbitration, but the province objected to a claim by HugoMB for $4.1 million in compensation for the province’s decision to bar the company from bidding on future contracts, referred to as Claim No. 7.

None of the claims in the lawsuit have been proven in court or arbitration.

The province brought a motion to determine whether the arbitrator had jurisdiction over Claim No. 7 and the arbitrator ruled that he did have jurisdiction.

The province appealed that decision to the Ontario Superior Court of Justice, arguing that Claim No. 7 was beyond the scope of the arbitration clause in the Tilden Lake contract.

The court agreed with the province and ruled that HugoMB would need to bring a separate court action against the province to pursue its claim for damages under Claim No. 7.

The contract was awarded in June 2019 for a total of $5.828 million. HugoMB was to “substantially” complete the project by February 2020, with all work being finished by May 2020.

“HugoMB did not meet the timelines in the contract,” according to the court decision.

“On March 8, 2021, the ministry notified HugoMB that it was in default and that, unless HugoMB delivered an acceptable schedule to remedy the default, the ministry could terminate HugoMB’s right to continue the work.”

While the company submitted a schedule on March 15, the province said it wasn’t acceptable and terminated the contract.

“To protect the dam from possible flood damage, including from floods that cannot be forecasted, and to minimize the potential risks to downstream residents, (HugoMB’s) right to continue the work is being terminated with immediate effect,” the province said in a letter to the company.

DENIED THE CLAIMS

The company denied the province’s claims.

“HugoMB asserted that it was in full compliance with the contract and that the ministry ‘subsequently and improperly disqualified Hugo MB from bidding on further contracts’ with the ministry,” the court’s judgment said.

In its decision, the court ruled that the agreement between the province and HugoMB was limited to addressing claims that come from the Tilden Lake Dam contract, not all disputes that may arise between the contractor and the province.

“The arbitration provision appears designed to capture disputes internal to the agreement itself, which must be resolved to ensure that the fixed-price contract between the parties operates smoothly,” the decision said.

“There is nothing in the language of (the contract) that suggests that all disputes of any kind between HugoMB and the Ministry are to be resolved through arbitration.”

Read the full decision here.