Subcontractor suing Nunavut mining company for millions in unpaid fees

The Mary River iron mine camp, about 160 kms southwest of Pond Inlet. (FILE PHOTO)

Baffinland Iron Mines Corp., which is trying to move ahead with new production plans at the Mary River iron mine and also rebuild a strained relationship with Baffin Inuit, now has something else to worry about: a multi-million-dollar lawsuit.

According to court documents, Baffinland is mired in a court battle with a subcontractor involving millions of dollars worth of services at its north Baffin mine.

The B.C.-based subcontractor, Arctic Construction Ltd., has alleged Baffinland owes them about $6.2 million for work on the mine site, at the Milne Inlet shipping port, and the service road in between.

But Baffinland denies it owes the company any money and claimed in court documents that the subcontractor actually owes the mining company at least $7.7 million for contract violations.

At the request of the lawyers, the Nunavut Court of Justice rescheduled the case. It will be heard in June 2017, over a two-day period.

Arctic Construction filed a lawsuit against Baffinland with the Nunavut court in December 2015.

In that document, the B.C. company said they were contracted for a number of jobs including building bridges on the mine’s service road, installing “fold-away buildings” for the mining company and foundation work for the mine’s airfield lighting.

That work began in September 2013 after both sides agreed on prices for those jobs and a 10 per cent mark up on materials shipped by the subcontractor to north Baffin.

As time went on, Baffinland approved Arctic Construction to carry out more work, the subcontractor said.

“At all material times, [Baffinland] was aware of the cost of all work being provided… and authorized and directed [Arctic Construction] to continue providing work.”

But Arctic Construction claims Baffinland stopped paying the bills with about $6.2 million still owing.

That’s why the B.C. company claimed a lien against Baffinland in September 2015.

A lien is the legal claim of one party over the property of another party in payment for a debt, usually held temporarily until that debt is paid.

In Arctic Construction’s lawsuit, the company is asking the Nunavut court to:

• order Baffinland to pay $6.2 million owed for completed work, plus 24 per cent annual interest, as agreed in the original contract;

• declare the lien against Baffinland’s Mary River estate and mineral production valid; and,

• order the sale of Baffinland’s Mary River assets if that lien does not pay enough to satisfy Arctic Construction within three months.

But in a statement filed in May, Baffinland denied all of the subcontractor’s allegations.

The mining company said it does not owe any more money, in part because the subcontractor incurred added expense to bring projects up to the agreed schedule and “unilaterally made changes to the scope and cost” of projects.

And Arctic Construction had to rely on Baffinland to find skilled labour, some of which the B.C. company then sent to the South to work on another project, the mining company said in response.

To boot, Arctic Construction “failed to perform… in a professional, prudent, expeditious and workmanlike manner and with the degree of efficiency, diligence, skill and care,” expected, Baffinland claimed.

The mining company listed two areas—bridges and fold-away buildings—in which it said Arctic Construction exceeded the proposed cost by $7.7 million.

Baffinland then counter-sued the subcontractor for that money and asked the court to dismiss Arctic Construction’s lawsuit and lien.

Lawyers on both sides are scheduled to argue their cases before a Nunavut judge on June 14 and June 15, 2017.