By Pepper Parr
March 31, 2014
BURLINGTON, ON.
We all know about insurance. We pay those premiums month after month convincing ourselves that we are “covered” and all too often when a catastrophe occurs we learn – the policy doesn’t cover that. It happens to households and it happens to the world of business as well – and when it happens in the construction industry – it can get messy.
June 17th – 2013 – It will be seen as a great day in the history of the city. Despite a horrendous cost and new levels of mismanagement by people who are no longer with the city – the pier was a good idea.
And if there was ever a messy construction project – look no further than The Pier at the foot of Brant Street. That situation is slowly working its way through the legal system. The next step is mediation – a process that is required before a case can be given a trial date.
Nancy Shea Nicol, the city solicitor has explained that at some point prior to any trial the Court will order that the parties engage in mediation to see if the issues can be resolved. Mediation does not make a determination of the legal rights of the parties; it is not binding and the mediator cannot impose a resolution on the parties. Mediation is a process where the people involved look for a way to see if they can agree on a settlement and avoid going to trial.
Mediation is a way to keep differences out of a court room. People involved in legal disputes – and in the pier situation there are five law suits – are required to at least attempt to mediate that dispute. It is useful to look at who is suing who:
Harm Schilthuis and Sons Limited (HSS) vs. City of Burlington
City of Burlington vs. Zurich Insurance Company (Bonding Company for HSS)
City of Burlington vs. HSS, EFCO, Aecom, Lombard, PV &V, Craneway (Insurance Claim)
City of Burlington vs. Aecom
HSS vs. Lombard, PV &V, City, Craneway (Insurance Claim)
What is instructive here is that HSS, the original contractor, is suing their insurance company and their insurance broker. You sue when you believe the service you bought was not delivered. HSS is also suing the city of Burlington – they believed they delivered and that the city has not paid for what was delivered.
The city is suing Zurich insurance – they are the company that provided the performance bond the contractor, HSS, was required to put in place.
There was a time when the city didn’t have more than $14 million of taxpayers money sitting at the end of Brant Street. There are those who think it should have been left the way it was.
The city called that performance bond, arguing that the contractor had not completed the job. The insurance company, Zurich, came back with a proposal to complete the pier – albeit at a higher cost – which the city didn’t like the look of and they declined the offer – pretty quickly it might be added – and went looking for a new contractor which they found, hired and paid. In June, 2013 the pier was officially opened.
Steel beams that had been installed, found to be flawed were taken out – they sit in the construction yard at HSS
The contract to build the pier was awarded in the summer of 2006. A new council was elected to office in October of 2006. Then there was the crane accident: August, 2008, during the first concrete pour, one of the main steel beams supporting the deck twisted. Two weeks later, a crane capsized onto the pier.
Fast forward to December 16, 2009, when HSS notified the city, in writing, that it was unwilling and unable to complete the pier construction contract. HSS then filed a construction lien against the city and issued a statement of claim in January 2010 – the gloves were off.
The city said at that time that it had a plan of action to complete the pier in a fiscally responsible manner and notified HSS’s bonding company, Zurich Insurance that HSS was in default. The city’s first recourse is to give the bonding company an opportunity to remedy HSS’s default and to follow the procedures as set out in the performance bond issued by the bonding company in favour of the city. Cam Jackson was still Mayor of Burlington at this time.
On June 18, 2010 HSS published a full-page advertisement in the Post to tell its story. The city issued a statement saying the “confidential, without prejudice discussions referred to by HSS,” in the advertisement, “contained significant new costs, which were not acceptable to taxpayers in the opinion of City Council, and additional conditions, which went against the advice of our legal counsel.”
The argument moved to a “he said”, “she said” stage where HSS said the company had not been paid by the city for invoices it had submitted and the city said it had already paid HSS $3.9 million of the total $6.5 million construction contract amounting to 60 per cent of the original contract.
This Council didn’t create the pier problems – but they did manage to drop the ball on more than one occasion when there were opportunities to limit the financial damage.
October 2010, a new city council gets elected; Cam Jackson is no longer the Mayor but the council still has three members, John Taylor, Jack Dennison and Rick Craven who were on council when the original contract was awarded.
In April 2011, the city received a proposal from Zurich Insurance Inc., the HSS bonding company, to settle the construction of the pier issues.
On May 11th, City Council, in a closed session was given an update on the proposal.
On May 24 city council decided not to consider the proposal. The public was never told what the proposal was or the reasons for rejecting it. We do know that the proposal did require the city to put more money into the construction of the pier but the public was never told how much more.
On September 26 council voted to hire Graham Infrastructure of Mississauga to complete the Brant Street Pier.
Graham Infrastructure’s bid was for a total contract price of $6,429,700, including full HST. Two optional items—a beach access ramp and additional concrete work for the waterfront promenade in Spencer Smith Park—were recommended for inclusion in the bid, bringing Graham Infrastructure’s contract price to $6,713,330.
The total project cost, including the nearly $5.98 million spent to date, would total $14.44 million.
The city made the most of what will be seen as an historic occasion; the youth of today lay their hands on the pier plaque on opening day.
On June 17th, 2013 the pier at the foot of Brant Street was officially opened.
But that is far from the end of the story. The pier ended up costing a lot more than anyone expected. The original contractor, HSS, has bills they sent the city before they left the construction site and which the city had approved for payment. But once the law suits were issued – everything was frozen. There were also invoices from the contractor that had been submitted but not yet approved. Those are still outstanding and the city is doing nothing about payment until the court case is settled.
These invoices, collectively are in excess of $1 million. HSS had bills to pay the trades that worked for them; they came perilously close to bankruptcy, which they believe many at city hall would have been quite happy to see happen. HSS has survived partly because the trades they have employed for more than 25 years stood by them and said they would wait for payment. When the court case is settled many believe HSS will be found to have been in compliance by walking off the job, their invoices will be paid, the tradesmen will get paid with interest that will come from the city of Burlington taxpayers.
The contractor, HSS is suing its insurance company and the broker who sold them the insurance policy. Lombard is believed to be the insurance carrier and PV&V Insurance, the broker who sold the policy to the contractor.
There is nothing pretentious about the HSS operation. A general contractor with a solid reputation known for doing the extras.Henry S sits ay his desk working the numbers.
Relationships are the foundation on which business people build trust. Henry Schilthuis, president of HSS, built relationships with his trades people who proved to be strong enough for them to wait for payment for the work they had done.
HSS is reported to have been dealing with PV&V for a considerable length of time and expected their insurance broker to defend their interests with the company carrying the insurance – in this case Lombard. Lombard apparently doesn’t think they have to pay on the policy claim HSS made. Messy.
While the contractor, HSS is unhappy with its broker and the insurance carrier – the city is unhappy as well and is going after the HSS the contractor, the contractors insurance company Lombard and the broker who sold the policy to the contractor PV&V and the project manager, AECOM.
This puts PV&V in a very awkward situation. They’ve got everyone coming after them, which doesn’t do much for credibility.
How does one mediate a mess like that? They look for a very skilled mediator – and the good ones are very much in demand. Finding one for this situation has been a challenge but it appears that a date for a mediation hearing has been set – June 19th, even though at least one of the parties is grumbling about the date chosen. Justice Fitzgerald, the judge handling this file has been pushing everyone on this.
In a document the city released before the mediation date of June 19th was set, the city said 17 days of examination for discovery had taken place which resulted in a considerable number of undertakings being given. An undertaking can be an obligation to find an answer to a question or produce further documents in response to questions.
Some undertakings were not agreed upon and required a court attendance for a determination as to whether or not the undertaking is valid. When one side doesn’t want to release information that is damaging to their case – it often requires a judge to tell them – give them the documents they are asking for.
Someone didn’t want to provide documents – our information is that it was the city that couldn’t find many of the documents and the project manager that seemed to require a lot of time to find documents.
The last time city solicitor Nancy Shea Nicol addressed council in open session she explained that there were another four to five days of examination for discovery and that up to that point more than 60,000 documents had been exchanged. At one point someone realized there was a collection of documents no one was fully aware of – it isn’t clear who it was who had the documents, the lawyers don’t talk about his stuff – they just send in their invoices and toil away.
The public has been asking for an accounting on those legal fees – they would like to know how much had been spent to date. The Post filed a Freedom of Information request asking how much had been spent on legal fees and was turned down by the city. The Post appealed that decision and the matter went to the Privacy Commissioner.
It didn’t take the city long to see the writing on the wall –they released the figures at a press conference on January 30th, – and said $1,349,952 had been spent to date.
The city had argued that telling the public what they spent on legal fees would reveal some of their strategy. The figures are out and there doesn’t appear to be any harm done. I leave it to you to figure that one out.
The fear of course was that the public would be outraged and demand that the city quit the case. It is a very complex case – the real fear is that the city will settle during the mediation process, have a confidentiality clause put into the agreement and the public will never know just what the settlement amounted to and how much they had to pay out.
Did the contractor really screw up and will his insurance company have to pony up with a big cheque. Did the city provide the contractor with a plan for the pier that had major flaws leaving the original contractor with no option but to walk off the job?
Did the contractors insurance company come back with a proposal that would solve the technical construction problems and cost less than the city has spent so far on legal fees?
Why doesn’t city council walk their transparency talk and inform the public – the people who have to pay the bill when council gets it wrong.
The differences are both financial and technical. There were problems with the design of the pier and there are significant differences of opinion as to what an insurance policy covered and what it didn’t cover.
Done – all the concrete is down – and the steel beams are holding it all in place. Now the railings get put in place.
Earlier this week city manager Jeff Fielding advised council that he and city solicitor Nancy Shea Nicol had met with the lawyers representing the city and outlined the city’s position that was going to be put forward during the mediation sessions – which are not very long – hours rather than days.
The city will put forward its position and set out what they are prepared to settle for. It is not known yet precisely who will do the talking, the person representing the city has to have the authority to agree on a settlement figure. The lawyers representing the city will be in the room.
In the event that the mediation proves to be successful the city is going to have to tell its citizens that there is more money yet to be paid out. The contractor, HSS has a claim that many informed observers see as valid – money will move from city hall over to HSS.
How much money will move from AECOM, the project managers and the owners of TSH the company that designed the pier, to city hall is the question that matters most to this city council. If they can recover from AECOM more than they have to pay HSS – they will look like heroes. And in an election period that will matter.
The mess the city is in wasn’t created by this council – but there were several opportunities to settle the problems that the city took a pass on.
Councillors Taylor, Dennison, Craven and Goldring, led by former Mayor Cam Jackson, were part of the council that got the city into the contracts the city is now defending. The contracts weren’t the biggest part of the problem; it was the management of the contracts that have hurt Burlington taxpayers. When the full story is out – and it will come out – taxpayers will be livid.
Most of the people in the city’s engineering department that handled all the technical issues and the relationship with AECOM are no longer with the city. They have moved on to other municipalities.
The idea for the pier came from a council led by former Mayor Rob MacIsaac, but he left town and went to Metrolinx, and then on to Mohawk College and has now settled as the president of Hamilton Health Services, the second largest health operation in the province with an annual salary of $542,000. With performance incentives that could rise to $650,000 excluding taxable benefits.
That virtually doubles his 2012 salary ($275,515 plus $47,210 taxable benefits) as president of Mohawk College. That is quite a step form the approximately $50,000 MacIsaac earned as mayor of Burlington. MacIsaac has a five years contract. While at Mohawk he had seven weeks of paid vacation; he gets just six weeks paid vacation with the Hamilton Health Services organization.
Of those who were on council when all this happened, only Mayor Goldring has filed nomination papers for re-election. Taylor, Dennison and Craven have yet to formally file.
