Allegations of dodgy contracting in Igloolik sent to trial

Justice Earl Johnson of the Nunavut Court of Justice has concluded that many issues raised in a lawsuit filed by LRT Construction of Igloolik against the Nunavut Housing Corp. and the Igloolik Housing Association require “a full trial with cross-examination to flesh out the facts to enable the trial judge to reach the proper legal conclusions.” (FILE PHOTO)

A lawsuit alleging the Igloolik Housing Association, the Nunavut Housing Corp., and the IHA’s acting manager breached multiple Nunavut government procurement rules in how they handled social housing repair contracts should go to trial, Justice Earl Johnson of the Nunavut Court of Justice ruled last month.

A company in Igloolik, LRT Construction Ltd., launched the lawsuit in relation to repair work performed in 2009 and 2010 on three social housing units owned by the Nunavut Housing Corp. and managed for the NHC by the Igloolik Housing Association.

Last summer, the housing corporation had sought a summary dismissal of all of LRT’s claims, but in a judgment dated Feb. 13, 2018, Johnson said many of them should go to trial.

LRT alleges the housing corporation and the housing association manipulated the tendering of the social housing maintenance jobs in ways that circumvented Government of Nunavut contracting rules, including the Nunavummi Nangminiqaqtunik Ikajuuti policy, the Financial Administration Act and the GN’s published contracting regulations.

They allege the NHC and IHA discouraged qualified Nunavut bidders and favoured unqualified bidders from outside Nunavut who had connections to staff at the housing association.

They also allege the NHC and IHA made concessions to unqualified bidders from outside Nunavut that were not offered to Nunavut bidders and that staff at the housing association ended up working for a Quebec-based construction firm that won the bids.

None of the allegations have been proven in court.

Housing association workers wanted to form own company

One of the disputed repair jobs, at a burned-out housing unit in September 2009, will not become the subject of a trial.

That’s because Johnson agreed to dismiss LRT’s claim on that particular part of the case, saying there’s no issue worthy trying.

On that one, the NHC had given the housing association $120,000 to complete work on the burned unit.

But instead of putting the job out to tender, IHA employees, including Terry Adams, the acting manager, and another worker named Danny Maurice, did the work themselves.

While still working for the Igloolik Housing Association, they had earlier wanted to incorporate a company to compete with LRT for housing association work, Johnson said.

But the NHC district manager, John Corkett, told them that wasn’t a good idea.

“The district director for the NHC found out about it and did not think it was a good idea because the employees were receiving free flights, meals and accommodations. Corkett told Adams that if they proceeded with the incorporation, they might lose their benefits,” Johnson’s judgment said.

Instead, Adams decided that he, Maurice, and others would do the work on the burned unit themselves after hours and on weekends.

“Those employees who were chosen to do the work, including Adams and Maurice, were paid overtime,” Johnson said.

At the time, Adams, as acting manager, was effectively in charge of the Igloolik Housing Association, because the manager, Joanasie Sarpinak, was ill and eventually died.

But Johnson said that because the repair of the burned unit was done in-house by the housing association, there are no GN contracting matters that require a trial on that issue.

“The plaintiff may have some concerns about the internal workings of the IHA and LHOs [local housing authorities] generally, but there was nothing unlawful or illegal in the way the work was done. The plaintiff complained about it and the NHC investigated and found there was no conflict of interest,” Johnson said.

IHA employees end up working for contract winner

But on the other local contract, LRT has provided enough evidence to justify sending the issues to trial, Johnson said.

That job was for a retrofit of two old social housing units. To get that work done, the IHA issued an invitation to tender that was advertised in northern newspapers.

The terms of the tender specified the winning contractor would get a one-time payment only, after full completion of the work.

That’s not the way such work was handled in the past, and the new provision persuaded LRT not to bid for it, since it was not financially feasible for them to acquire materials up front and then wait until the very end of the job to get paid.

So neither LRT nor anyone else responded to the request for tender.

The IHA then split the job into two sections: one for supply of materials only and the other for labour only.

But the materials portion of the contract did not go to public tender.

“The contract was not awarded by public tender. Instead, Northern Networks Ltd. [NNL] and Ikpiarjuk Services Ltd. were awarded the contracts and the plaintiff was not invited to submit a tender,” Johnson said in his judgment in a summary of facts.

LRT was not only not invited to submit a tender for materials, the winning materials supplier was compensated in two payments, a provision not previously made available.

As for the labour portion, that was handled in an invitation to tender.

But it was not advertised in any newspapers, and it’s not clear whether it was posted on local bulletin boards.

“The RFT was not advertised in any northern or southern newspaper. It may have been posted on local bulletin boards,” Johnson said.

At the same time, the owners of LRT, Lee and Richard Turbide, were on vacation at the time and did not know about the re-tendering of the retrofit work.

The winning bidder was a company from Quebec, Construction FHD Inc., or “CFHD,” whose parent company is owned by Fernand Dumas.

Terry Adams and Danny Maurice ended up working for CFHD later, on work that CFHD had won from the Igloolik Housing Association, Johnson said.

In a summary of facts, Johnson listed a variety of irregularities in that arrangement.

• CFHD was not required to register as a corporation in Nunavut, obtain a business licence, obtain workers’ compensation coverage or obtain a building permit.

• CFHD was permitted to use IHA tools, equipment and employees.

• Adams and Maurice both worked on the job for CFHD.

• Adams arranged for the only person CFHD sent to Igloolik from Quebec to stay with a friend of his.

• The job was completed before the materials for the job arrived on the sealift.

Another irregularity is that CFHD’s bid was sent by fax, not in a sealed enveloped, contrary to contracting rules.

“The CFHD bid may have been non-compliant with the bid requirements because it was not delivered in a sealed envelope but sent in by fax. Instead of rejecting the bid, Adams recommended to NHC that CFHD be awarded the contract,” Johnson’s judgment said.

Maurice and Dumas also turned up as directors of a new company that was incorporated on April 15, 2010, called Iglulik Construction Inc.

“Iglulik was incorporated almost a year after Adams, Maurice and others working for NHT were told that it was a bad idea to incorporate and compete with the plaintiff for housing work,” Johnson said.

The Nunavut Housing Corp.’s annual report for the year ending March 2011 shows that Iglulik Construction Inc. won a contract to build a five-plex unit in Igloolik.

“The NHC did not attempt to defend or explain the many other apparent irregularities in the administration of the tendering by the IHA, such as the acceptance of a faxed bid which was not in a sealed envelope and did not have the scope of the work filled in,” Johnson said.

“In addition, the IHA may have overlooked non-compliance with statutory requirements such as workers’ compensation and changed the payment terms to include progress payments.”

Because of these multiple irregularities, Johnson concluded that LRT’s claims require “a full trial with cross-examination to flesh out the facts to enable the trial judge to reach the proper legal conclusions.”

LRT Construction Ltd. v. Igloolik Housing Association et alia, Nunavut Court of Justice by NunatsiaqNews on Scribd