While work on Saskatoon’s $272.5 million Circle Drive South Project continues, a counter-claim against the city and a concrete pipe manufacturer, filed by one of the subcontractors, remains at a standstill.
While work on Saskatoon's $272.5 million Circle Drive South Project continues, a counter-claim against the city and a concrete pipe manufacturer, filed by one of the subcontractors, remains at a standstill.
IONA Contractors Ltd. suffered a financial meltdown midway through its contract.
The firm was sub-contracted by general contractor Graham-Flatiron to install rigid concrete pipe (RCP) for the underground sewer system portion of the project.
In December 2010, IONA's parent company, Envision Engineering and Contracting Inc., filed for creditor protection.
Calgary-based IONA owes about $26 million to its creditors, including $10 million in unsecured debt to a range of companies and individuals, some of whom are based in Saskatoon, such as the Saskatoon Travelodge Hotel and Wolseley industrial pipe and valve manufacturer.
RSM Richter has been appointed receiver for IONA Contractors Ltd.
However, IONA claims the City of Saskatoon and Expocrete Concrete Products Ltd., the manufacturer of the RCP, had worked out a deal that restricted IONA to the use of the Expocrete pipe product, which IONA claims was deficient, which led to a delay in the completion of its sewer work.
IONA is seeking $4.5 million, plus $500,000 in punitive damages, from the city and Expocrete.
Saskatoon city solicitor, Theresa Dust, said they are still waiting for more information from IONA regarding their claim.
“The city has served IONA with a Demand for Particulars regarding their claim. We have not yet received a response,” she said.
“Once we receive a response, we will be filing a Statement of Defence.”
Dust added that the city’s contract is with general contractor Graham-Flatiron, not with IONA.
“The contract between the city and Graham Construction requires that any water and sewer work done on the project must comply with the city’s standard water and sewer construction specifications. These specifications have been in place for many years and have been used successfully on several projects,” she said.
“The specifications require the use of a certain type of pipe—they do not specify that a certain manufacturer of pipe must be used. The city had no involvement in any contractual arrangements between IONA, Expocrete, and/or Graham Construction.”
As of mid-March, Doug Drever, Circle Drive South project manager with the City of Saskatoon, said that Graham-Flatiron had decided to continue the work themselves.
Jason Ruddick, project manager with Graham-Flatiron said the decision to finish the work boiled down to timing.
“It was becoming critical,” he said.
Conrad Hadubiak, a lawyer with MacPherson Leslie & Tyerman (MLT) in Regina, whose principal focus is bankruptcy and insolvency, corporate restructuring and receiverships, said there are a number of different rules that apply depending on what has happened by way of insolvency in Saskatchewan.
One of the typical processes sees each of the contractors or subcontractors provide a completion bond.
They pay what is essentially an insurance fee in the event that they won’t be able to complete the project.
He said the bonding company would then step in to complete the project.
“For bigger projects, that’s typically how it will be done. Each of the parties will have a bond and the project will still get completed,” he said.
The other mechanism that applies is essentially a builders’ lien—10 per cent of pay is held back to ensure work gets done.
“This money will be paid to a new builder to ensure the project gets done in the event that one builder in the chain has solvency issues,” he explained.
Also, Hadubiak said special rules apply for a bankruptcy or receivership: a receiver may take steps sometimes to complete a project, but only if a net benefit to that B or R (bankruptcy or receivership) company is positive—actual money generated from completing that.
“So that doesn’t always happen,” he said.
“Certainly if a bankruptcy or receivership intervenes, it will complicate the completion of a project. Typically there will be somebody that steps in to complete the project.”
As MLT may be representing one of the creditors, who are owed money by IONA Contractors Ltd, Hadubiak noted that he could only speak generally about insolvencies.
concrete pipe for Circle Drive South
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