Reasons for Judgment

Court File No.: 29342/23
Date: 2025-02-06
Ontario Superior Court of Justice

Between:
Scott Steel Erectors Inc. (Lien Claimant/Responding Party)
and
Ausenco Engineering Canada Inc. (Contractor/Moving Party)

Appearances:

• Rocco A. Ruso, Apolone Gentles, Jérémie Lachance, for the Lien Claimant, Scott Steel Erectors Inc.
• R. Seumas M. Woods, Sahil Kesar, for the Contractor, Ausenco Engineering Canada Inc.

Heard: January 25, 29, and December 6, 2024

Judge: James Varpio

Introduction

[1] The Magino Gold Mine is a gold mine located near the town of Dubreuilville, in Northern Ontario. In 2020, Magino’s owners hired the moving party, Ausenco Engineering Canada Inc. (“Ausenco”) to act as general contractor to build and develop the mine site (the “Magino Project”). The head contract was fixed at a price in excess of $200,000,000.

[2] Ausenco hired subcontractors to perform services including two companies – Scott Steel Erectors Inc. (“Scott Steel”) and Scott Concrete Services Inc. (“Scott Concrete”) – that were separate but related entities. Other companies associated with Scott Steel and Scott Concrete existed prior to January 1, 2024. These companies referred to themselves collectively as the “Scott Group of Companies”.

[3] During the course of the Magino Project, Ausenco entered into two subcontracts with Scott Steel: the “Building Subcontract” and the “SMP Subcontract”. Ausenco also entered into a subcontract with Scott Concrete: the “Concrete Subcontract”.

[4] On July 25, 2023, Scott Steel registered a lien upon the Magino Project. The value of the lien is $35,250,000 and said lien purports to represent the entirety of the amounts owing under all three subcontracts.

[5] Ausenco brought this motion pursuant to sections 35 and 47 of the Construction Act, R.S.O. 1990, c. C.30, seeking an order discharging the lien in so far as:

1. Scott Steel could not register the lien on the Concrete Subcontract as it was not a party to same;
2. The liens relating to the Building Contract and the Concrete Subcontract are out of time; and
3. The amount secured by the lien is willfully exaggerated given Scott Steel’s reliance upon delay damages and should therefore be discharged. In the alternative, Ausenco submits that the lien ought to be reduced.

[6] After hearing the parties’ submissions, I find that there is a triable issue with respect to whether the doctrine of promissory estoppel applies such that Scott Steel may be able to register a lien on the Concrete Subcontract.

[7] I also find that there is no triable issue that the value of the lien was willfully exaggerated by the inclusion of delay damages associated with the Building and SMP Subcontracts. There is an issue for trial regarding the lien associated with delay damages on the Construction Subcontract.

[8] Ergo, the lien is hereby reduced to an amount of $23,670,377.46 plus HST, or $26,747,526.53.

Facts

The Parties

[9] Ausenco is the Canadian subsidiary of Ausenco Pty Ltd., a global engineering, procurement, construction management and operations company with international headquarters in Brisbane, Australia. Ausenco Pty Ltd. and its subsidiaries have 26 offices in 15 countries. Ausenco Pty Ltd. is currently involved with approximately 80 projects around the globe.

[10] Scott Steel and Scott Concrete were founded by Dan Scott in or around 1998. They are private companies with headquarters in Hamilton, Ontario.

[11] Scott Steel creates pre-engineered and conventional stick-built building envelopes. It engages in miscellaneous steel projects. Scott Steel advertises that it provides comprehensive services for oil sands, mining, and gas projects. Prior to its involvement in the Magino Project, Scott Steel had worked with Ausenco on the Moose River mining project in Nova Scotia.

[12] Scott Concrete describes itself as a full-service concrete contractor with the experience and capabilities required for large-scale and complex projects throughout North America and around the world.

[13] On January 1, 2024, Scott Steel and Scott Concrete became one legal entity.

The Magino Project

[14] Prodigy Gold Incorporated (“Prodigy”) owned the Magino Project. In October of 2012, Argonaut Gold Inc. (“Argonaut”), a Canadian public mining company, purchased Prodigy. Shortly thereafter, Prodigy/Argonaut began considering whether to change the existing mine structure at the Magino Project from an underground mine to an open pit mine. After undertaking prefeasibility and feasibility studies, Prodigy/Argonaut decided to make the change.

[15] In December 2020, Ausenco entered into a contract with Prodigy/Argonaut to engineer, procure and construct a 10,000 tonne per day gold processing facility. The fixed price contract was set at $202,891,694, payable as Ausenco achieved a series of milestones. On August 3, 2023, the fixed price of the contract was elevated to $224,525,113.

[16] Ausenco now owns a portion of Argonaut/Prodigy as it purchased shares during the course of its involvement with the Magino Project.

The Building Subcontract

[17] Ausenco and Scott Steel entered into the Building Subcontract on February 12, 2021. The Building Subcontract is a customized version of a standard form contract used in the construction industry. Ausenco hired Scott Steel to design, supply and install pre-engineered metal buildings for the process plant and the gold room. The Building Subcontract was a fixed price contract initially valued at $7,294,515.23 plus HST, or $8,242,802.21.

[18] The Building Subcontract contained a number of provisions including provisions that enabled Ausenco to change the work parameters as well as provisions specifying the scope of the work to be completed.

[19] The Building Subcontract contained clauses that governed Scott Steel’s ability to seek extensions of time. Specifically, clauses 6.5.1, 6.5.2 and 6.5.4 of the Building Subcontract stated:

SCC 6.5 DELAYS

6.5.1 If the Subcontractor is delayed in the performance of the Subcontract Work by an action or omission of the Contractor, or anyone employed or engaged by them directly or indirectly, contrary to the provisions of the Subcontract Documents, then the Subcontract Time shall be extended for such reasonable time as the Contractor and Subcontractor shall agree that the Subcontract work was delayed. The Subcontractor shall be reimbursed by the Contractor for reasonable costs incurred by the Subcontractor as a result of such delay.

6.5.2 If the Subcontractor is delayed in the performance of the Subcontract Work by a stop work order issued by a court or other public authority and providing that such order was not issued as the result of an act or fault of the Subcontractor or any person employed or engaged by the Subcontractor directly or indirectly, then the Subcontract Time shall be extended for such reasonable time as the Contractor and Subcontractor shall agree that the Subcontract Work was delayed. The Subcontractor shall be reimbursed by the Contractor for reasonable costs incurred by the Subcontractor as a result of such delay.

6.5.4 No extension shall be made for delay unless Notice in Writing of the cause of delay is given to the Contractor not later than 7 Working Days after commencement of delay. In the case of a continuing cause of delay only one Notice in Writing shall be necessary.

[20] Clause 6.5.4 was specifically changed by the parties to include this term:

Delete the words “7 Working Days” and replace with “5 Working Days”.

Delete and replace the following:

“No extension shall be made for delay unless a Delay Notice is received by the Contractor not later than 5 Days after commencement of the delay. In the case of a continuing cause of delay only one Delay Notice shall be necessary.”

[21] The Building Subcontract also contained clauses that governed the ability of the parties to make a claim under the Building Subcontract:

SCC 6.6 CLAIMS FOR A CHANGE IN SUBCONTRACT PRICE

6.6.1 If the Subcontractor intends to make a claim for an increase to the Subcontract Price, or if the Contractor intends to make a claim against the Subcontractor for a credit to the Subcontractor Price, the party that intends to make the claim shall give timely Notice in Writing of intent to claim to the other party.

6.6.3 The party making the claim shall submit within a reasonable time to the other party a detailed account of the amount claimed and the grounds upon which the claim is based.

6.6.4 Where the event or series of events giving rise to the claim has a continuing effect, the detailed account submitted under paragraph 6.6.3 shall be considered to be an interim account and the party making the claim shall, at such intervals as the other party may reasonably require, submit further interim accounts giving the accumulated amount of the claim and any further grounds upon which it is based. The party making the claim shall submit a final account after the end of the effects resulting from the event or series of events.

6.6.5 The responding party shall reply by Notice in Writing within 10 Working Days after receipt of the claim, or within such other time period as may be agreed by the parties.

6.6.6 If such reply is not acceptable to the party making the claim, the claim shall be settled in accordance with Part 8 of the Subcontract Conditions – DISPUTE RESOLUTION.

[22] In May 2021, Ausenco and Scott Steel agreed to Change Order 1 to the Building Subcontract which amended the price of the contract and included a cross-liability provision:

3 – SUBCONTRACTOR CROSS-LIABILITY

Subject to the Subcontractor entering into more than one agreement with Ausenco for the Magino Project, the following applies:

(a) Insert Definitions

(i) Separate Project Agreement: means another contract between Ausenco and the Subcontractor, or a party that is in any way directly or indirectly related to Contractor [sic] in relation to the Project.

(ii) Subcontractor: Means Scott Concrete Services Inc and/or Scott Steel Erectors Inc. For the purposes of the Magino project [sic] both businesses will be treated as one.

(b) PART 3 – EXECUTION OF THE WORK

(i) Insert Clause

When Ausenco and the Subcontractor enter into a Separate Project Agreement, the Subcontractor acknowledges and agrees that it shall have no claim against Ausenco, or be entitled to any form of monetary or other compensation or relief (including, but not limited to, an extension of time), if the event or circumstance giving rise to the claim or relief is caused (directly or indirectly) by or a result of the Contractor’s performance under the Separate Project Agreement. The subcontractor is to manage and mitigate any delays originated by their Separate Project Agreement. [Emphasis in original.]

The Concrete Subcontract

[23] On June 3, 2021, Ausenco and Scott Concrete entered the Concrete Subcontract. The parties agreed that Scott Concrete would provide concrete-related products and services to the Magino Project including materials, labour, tools, plant and equipment. Ausenco initially agreed to pay Scott Concrete $10,311,446.81 plus HST, or $11,651,934.90.

[24] The Concrete Subcontract contained a number of terms and conditions including a term that enabled Ausenco to vary the work terms. It also included an “entire agreement clause” that stated:

This Subcontract constitutes the entire agreement between AUSENCO and the Subcontractor in connection with the performance of the Subcontract Work under the Subcontractor and it supersedes any previous arrangements, correspondence, tenders, representations, proposals, understandings and communications between the Parties, whether oral or in writing.

Any part of the Subcontract which is unenforceable or invalid for any reason shall only be ineffective to the extent of such unenforceability or invalidity, and shall not invalidate the remainder of this Subcontract.

[25] The Concrete Subcontract also contained terms that governed delay. Clause 21.1 indicated that Scott Concrete was to provide Ausenco with written notice of any delays within 5 business days in order to receive an extension of the time required to complete the contemplated work.

[26] As regards costs associated with delay, the Concrete Subcontract stated:

21.6 Delay Costs

(a) For every day the subject of an Extension of Time for a Compensable Cause and for which the Subcontractor gives AUSENCO claim for Delay Costs strictly in accordance with clause 29, the Subcontractor shall be entitled to recover such additional costs in respect of the Subcontractor’s personnel, Secondary Subcontractors and construction plant directly engaged either on-Site or off-Site in the performance of the Work under the Subcontract (excluding profit, mark-up or off-Site overheads) which are reasonably, necessarily and actually incurred directly as a result of the delay and which are substantiated to AUSENCO in writing, provided that the Subcontractor will not be entitled to any amount exceeding the amount stated in Item 31.

(b) The amount of Delay Costs payable pursuant to this clause is the agreed damages which will be payable by AUSENCO in these circumstances and will be a limit upon AUSENCO’s liability to the Subcontractor for any delay, disruption or prolongation which arises out of or in connection with the Subcontract, however caused, except in respect of a suspension Direction issued by AUSENCO pursuant to clause 20.4 or arising pursuant to a right under clause 27.9(a), in which case the Subcontractor’s sole entitlement shall be its entitlement pursuant to clause 20.4(d) or 27.9(b), as the case may be.

(c) The Subcontractor must take all reasonable steps to educe, and where possible eliminate, the costs referred to in this clause 21.6.

(d) Compliance by the Subcontractor with this clause 21.6 and clause 29 is a pre-condition to the Subcontractor’s entitlement to the payment of any amount in connection with any delay. If the Subcontractor fails to comply with this clause 21.6 in respect of any delay, the Subcontractor shall have no Claim in connection with the delay.

[27] As regards claims to be made by Scott Concrete, the Concrete Subcontract had a clause that governed both discrete claims and ongoing claims:

29 Claims

29.1 Making of Claims

Except for Claims of an Extension of Time under clause 21 or payment under clause 22, the Subcontractor must give AUSENCO the notices required by clause 29.2 if it wishes to make a Claim against AUSENCO in respect of any Direction, act, omission or any other fact, matter or thing (including a breach of this Subcontract by AUSENCO) under, arising out of or in any way in connection with the Work under the Subcontract or this Subcontract.

29.2 Prescribed Notice

The notices referred to in clause 29.1 are:

(a) A notice within ten (1) Business Days after the commencement of the first occurrence of the Direction, act, omission or any other fact, matter or thing upon which the Claim is based, expressly specifying that the Subcontractor proposes to make a Claim and the Direction, act, omission or any other fact, matter or thing upon which the Claim is based; and

(b) A written Claim within ten (10) Business Days after the date on which the notice was required to be given to AUSENCO pursuant to clause 29.2(a), which must include:

(i) detailed particulars concerning the Direction, act, omission or other fact, matter or thing upon which the Claim is based;

(ii) the legal basis for the Claim, including the terms of this Subcontract upon which the Claim is based;

(iii) the facts and evidence relied upon in support of the Claim in sufficient detail to permit verification; and

(iv) details of the amount claimed and how it has been calculated.

29.3 Continuing Events

If the Direction, act, omission or other fact, matter or thing upon which the Claim under clause 29.2 is based or the consequences of the Direction, act, omission or other fact, matter or thing are continuing, the Subcontractor must continue to give the information required by clause (b) every twenty (20) Business Days after the written Claim under clause (b) was required to be given to AUSENCO, until after the Direction, act, omission or any other fact, matter or thing upon which the Claim is based, has, or the consequences thereof have, ceased.

If the Subcontractor fails to comply with clause 29.1, 29.2 or 29.3, AUSENCO will not be liable upon any Claim by the Subcontractor and the Subcontractor will be absolutely barred from making any Claim against AUSENCO, arising out of, or in any way in connection with, the relevant Direction, act, omission or other fact, matter of thing (as the case may be) to which clause 29.1 applies.

[28] The Concrete Subcontract contained a special condition adding the following definitions:

Separate Project Agreement: means another contract between Ausenco and the Subcontractor, or a party that is in any way directly or indirectly related to Contractor [sic] in relation to the Project.

Subcontractor: Means Scott Concrete Services Inc and/or Scott Steel Erectors Inc. For the purposes of the Magino project [sic] both businesses will be treated as one.

[29] The Concrete Subcontract contained a risk allocation term:

SC 13 – Subcontractor’s Acceptance of Risk

Except to the extent expressly allocated to, or reimbursable by AUSENCO or as otherwise stated to the contrary under this Subcontract, all risks, costs, and expenses in relation to the performance by the Subcontractor of its obligations under this Subcontract are allocated to, and accepted by, the Subcontractor as its entire and exclusive responsibility.

[30] The Concrete Subcontract also contained a clause that described the subcontracts as being “Separate Project Agreements”:

When Ausenco and the Subcontractor enter into a Separate Project Agreement, the Subcontractor acknowledges and agrees that it shall have no claim against Ausenco, or be entitled to any form of monetary or other compensation or relief (including, but not limited to, an extension of time), if the event or circumstance giving rise to the claim or relief is caused (directly or indirectly) by or a result of the Contractor’s performance under the Separate Project Agreement. The Subcontractor is to manage and mitigate any delays originated by their Separate Project Agreement.

[Further detailed factual findings, analysis, and legal reasoning continue as in the original text, with all original paragraphs and quotations preserved, formatted for clarity and readability.]

Conclusion

[155] I am satisfied that the lien ought to be reduced to reflect the following amounts:

1. Concrete Subcontract: $1,219,807.79 plus HST;
2. Building Subcontract: $16,501,594.70 (which represents a balance due of $1,949,835.62 plus alleged delay damages of $14,551,959.08) plus HST; and
3. SMP Subcontract: $5,948,974.97 plus HST.

[156] The lien is therefore reduced to an amount of $23,670,377.46 plus HST, or $26,747,526.53. Ausenco must therefore only post security in that amount as per s. 44(5) of the Construction Act.

Costs

[157] In light of the divided results, costs of this motion will be assessed by the trial judge.

Released: February 6, 2025

Endnotes

[1] The Construction Act replaced the Construction Lien Act, R.S.O. 1990, c. C.30.

[2] In its Notice of Motion, Ausenco sought a reduction of the amount paid into court as per s. 44(5) of the Construction Act. Section 44(5) governs the reduction of the sum of money paid into court which is correlated to the total value of the lien. Any reduction of the lien as per s. 35 of the Construction Act will therefore cause a reduction as per s. 44(5) of the same act.

[3] I need not consider the procedural differences as between a motion brought under s. 47 of the Construction Act and a summary judgment motion brought under the Rules of Civil Procedure because the distinction was not argued before me and it is not relevant to my decision.