BC Ferries sued for libel, re JA Burr item

[Low Light Mike]

Read on......

www.canada.com:80/vancouversun/news/westcoastnews/story.html?id=fa852541-b7f3-4db5-a6c0-3659d192ac65

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BC Ferries, president placed under scrutiny

Hahn denies vessel bought in Utah was evidence of poor performance by ferry corporation despite costing well over budget

Neal Hall
Vancouver Sun

Thursday, May 01, 2008

VANCOUVER - The performance of BC Ferries and its president, David Hahn, were placed under scrutiny Wednesday at a libel trial launched by two naval architects and their companies over work done years ago.

Hahn testified in B.C. Supreme Court that he took over the helm of BC Ferries five years ago, on May 5, 2003.

Cross-examined by lawyer Bryan Baynham, representing the plaintiffs suing BC Ferries, Hahn denied that a vessel bought in Utah was evidence of poor performance by the ferry corporation. The original budget for the vessel was $4.8 million but the final cost was $11.7 million.

"Wrong," testified Hahn.

Two naval architects, Ralph Marwood and Robert Armour, are suing over an internal memo sent March 15, 2006 by Mark Collins, vice-president of engineering for BC Ferries.

The alleged defamatory e-mail said two companies, Armour's Polar Design Sales of Vancouver and Marwood's Maritime Design Associates of Victoria, were no longer approved for any more contracts.

They claim the e-mail was later distributed to other individuals and companies, which damaged their reputation by cancelling approval for any projects and wrongly suggesting poor performance left BC Ferries with "hundreds of thousands of unanticipated costs."

The plaintiffs' lawyer pointed out that the Utah ferry project went $7 million over its original budget within a seven-month period.

"That's $1 million a month over budget," Baynham said.

Hahn said the original cost estimate was only a preliminary budget at the start of a project.

The ferries president pointed out that it would have cost about $24 million to build a new ferry but instead the company bought the 46-metre MV John Atlantic Burr, which had been a ferry for 20 years on Powell Lake in Utah.

The vessel had to be cut into four pieces, trucked to Tacoma, then barged to Victoria's Allied Shipyards.

Baynham pointed out that the original cost estimate for transportation of the vessel to B.C. was about $400,000 but it actually cost $1.2 million.

"We knew there would be substantial transportation costs," Hahn testified. "This was not a simple move."

The lawyer pointed out when BC Ferries issued a press release in 2006, announcing the launch of the refitted vessel, renamed MV Kuper, the stated cost was $7 million.

"That's the shipyard price," Hahn told Justice Lauri Ann Fenlon at the trial, which continues today in Vancouver.

"You're trying to hide the fact that BC Ferries spent $12 million on this ferry," Baynham suggested.

"This was a $7-million contract with the shipyard," Hahn said, comparing it to the recent German-built ferries.

Naval architect Marwood, president of MDA, provided on-site supervision in Utah. He was previously the senior architect of K-class ferries and principal architect of Q-class ferries.

Naval architect Robert Armour, doing business as PDS, was the chief designer of the Spirit-class ferries and had completed many projects for BC Ferries.

Armour, of PDS, claims he was wrongly blamed for a hard landing of the North Island Princess, which resulted in injuries.

Hahn was asked Wednesday if he was aware that the cause of the hard landing was a controls problem rather than a design problem. Hahn said he isn't an engineer, so it was beyond his expertise.

The plaintiffs, including master mariner David Smiley, sued BC Ferries in 2006, claiming Collins's e-mail defamed their reputations by wrongly suggesting the plaintiffs provided unsatisfactory advice and inadequate naval design services.

Hahn testified he was aware the plaintiffs asked for an apology in a letter sent in 2006, which he turned over to the company's lawyers. "We did not apologize," Hahn recalled, saying he didn't feel the e-mail was defamatory. He also denied the final cost of the former Utah ferry project was evidence of poor performance of himself or Collins. Hahn said he allowed Collins to carry out his job and decide what was the best value for BC Ferries.

Hahn, who finished his cross-examination Wednesday, is not named as a defendant in the lawsuit against BC Ferries, Collins and 15 other employees.

[e-mail]

© The Vancouver Sun 2008

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[guest 101]

Small change of subject - but given the time delays and possible cost over runs on the MV Island Sky - are we going to see the same type of action from BC Ferries?

They don't seem to be making many friends in the maritime world are they?

[doctorcad]

The irony is that Bob Armour designed the Island Sky. He is doing jobs for BCFS to this day...

[101]

what is the out come of the court case - who won and who lost?

It must be over by now ?

[kylefossett]

May 15, 2008 8:20:04 GMT -8 @doctorcad said:

The irony is that Bob Armour designed the Island Sky. He is doing jobs for BCFS to this day...

That is not the only case where someone was sued for business arrangements and then still doing business together. Another example is Tom Gaglardi and Ryan Beddie suing Franseco Aquilini and John McCaw over the sale of the Vancouver Canucks. At this time Gaglardi and Aquinlini are business partners trying to develop the Garibaldi ski area just outside Squamish.

[Neil]

May 23, 2008 7:03:15 GMT -8 @Guest 101 said:

This word - Accountability is starting to appear again in the press - and not from "simple" letter writers to the local editor.

We just don't have it with this Board of Directors.

Hahn Executive team is also starting to look pretty bad - but I am still waiting the out come of the BC Supreme Court Case against BC Ferries - concerning the cost over runs - lack of proper budget controls - with regards to the Kupper.....

Tell me how can BC Ferries people make a budget to transport the 4 pieces of a hull - at $400,000 only for the final bill to come to $1.2M.....I am sorry but this is plain stupid, and who were the Senior VP's who signed off on this project??

Line them up and fire them all....

Cascade, if we're going to have a public hanging, let's at least be clear on what the issue is...

BC Ferries is not, despite what you suggest, on trial for any financing irregularities with the Kuper (one 'p'). They are answering a civil suit where the plaintiffs allege that they were libelled in a memo sent by VP Mark Collins, which they say damaged their reputations as marine architects.

One statement by their lawyer which is simply not true alleges that BC Ferries was trying to "cover up" the fact that the Kuper's total cost, all in, was $12 million. Not so. The last annual report mentioned that figure several times. Perhaps you're having the same confusion that you had with the Northern Adventure, where the final figure, including all costs, was necessarily considerably higher than the purchase price.

What could use some explanation is how the Kuper's cost increased from the $4.5 million, all inclusive, which was mentioned in the initial press release issued after purchase, to the final $12 million. $4.5 million seems ridiculously low, even for a ballpark estimate, and one wonders how they arrived at it.

[Low Light Mike]

A news story update:

www.canada.com:80/vancouversun/news/story.html?id=abb79489-055e-472c-a219-be6e95911b98
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Defamation lawsuit against BC Ferries fails over internal memo

Neal Hall
Vancouver Sun
Tuesday, October 28, 2008

VANCOUVER - A judge has dismissed a libel lawsuit against BC Ferries launched by two well-respected naval architects and a master mariner.

All three plaintiffs had a long history of providing service to BC Ferries in the design and construction of large vessels in the fleet.

The naval architects, Ralph Marwood and Robert Armour, sued over an internal memo sent March 15, 2006 by Mark Collins, vice-president of engineering for BC Ferries.

They and master mariner David Smiley claimed Collins's e-mail defamed their reputations by wrongly suggesting the plaintiffs provided unsatisfactory advice and inadequate naval design services.

The e-mail said Smiley, Armour's Polar Design Sales of Vancouver and Marwood's Maritime Design Associates of Victoria were no longer approved for any more contracts.

The plaintiffs claimed the e-mail was later distributed to other individuals and companies, which damaged their reputation and wrongly suggested poor performance by the plaintiffs left BC Ferries with "hundreds of thousands of unanticipated costs."

BC Ferries terminated the employee held responsible for sending the e-mail outside of BC Ferries.

B.C. Supreme Court Justice Lauri Ann Fenlon found that none of the work by the plaintiffs was deficient.

"The effect of the email on the plaintiffs was immediate and devastating," the judge said in a written ruling released Tuesday. "As a result, say these plaintiffs, their work virtually dried up with disastrous financial results that took a heavy economic and emotional toll on them and their families. "

But the judge found the plaintiffs failed to prove defamation or malice, so the plaintiffs' claims failed.

BC Ferries president David Hahn testified during the trial that Collins was hired to bring a business approach to the engineering department, to improve accountability by taking a more demanding approach towards vendors of services to BC Ferries.

The full judgment is available on the B.C. Supreme Court website.

[e-mail]
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And here's the link to the full-judgement on the BC Court site:
www.courts.gov.bc.ca/Jdb-txt/SC/08/14/2008BCSC1432.htm

....you'll see that the word "cascade" is key to the judgement; but not in the usual context of this here forum. ;D

[Low Light Mike]

For those who didn't look at the long judgement article linked in the previous post, here's some excerpts that relate to refits done on certain ships.

So even if you don't care about this legal case, you might enjoy reading about the refit:
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The North Island Princess
[74] In March of 2004, BC Ferries was addressing a significant problem with the North Island Princess, a ferry running between Texada Island and Powell River.

[75] Mr. Armour had been engaged some months earlier to investigate and make recommendations about the re-engining requirements of that vessel which had been experiencing vibration problems leading to oil leaks and environmental fines being levied against BC Ferries. Mr. Armour had recommended installing a new engine and changing the propulsion system which involved installing a new shaft and propeller.

[76] BC Ferries followed Mr. Armour’s advice and proceeded with the re-engining of the North Island Princess. PDS prepared the specifications and drawings necessary for a shipyard to bid the work. Eventually a purchase order was issued by BC Ferries to Detroit Diesel Allison (“DDA”) for the engines, gear box, controls, and propeller. It was the responsibility of DDA to manufacture these components in accordance with the specifications provided by PDS. Mr. Armour played no role in the actual design or manufacture of the propeller.

[77] After the re-engining, the North Island Princess was put back into service. On November 2003, it crashed into a dock, injuring a passenger and one employee, as well as causing damage to passengers’ vehicles, the vessel itself, and the berth at Powell River.

[78] The crash occurred because both engines stalled as the ship was approaching the terminal, preventing the captain from slowing the vessel down as it approached the dock.

[79] The acting senior chief engineer on the vessel reported to BC Ferries that the propellers were not the problem. He concluded that the DDA-made controls were causing the problem because they were not interacting properly with the engine’s software. Mr. Armour agreed with that view.

[80] BC Ferries decided to obtain an opinion from another firm, GasTops. On March 12, 2004, GasTops supported Mr. Armour’s conclusion that the problem lay with the control system. LamaLo Technology Inc. was also retained, and conducted sea tests in early March. LamaLo concluded that the engine stalls “are a result of faulty logic in the bridge control system”. It recommended that “the control system be modified.”

[81] BC Ferries worked with DDA to try to correct the control system problem, but after repeated efforts, DDA told BC Ferries that it could do nothing further. Mr. Armour advised BC Ferries to use a “fast idle technique” to get around the control system problem which was causing the engine to operate below the stall point.

[82] The fast idle technique recommended by Mr. Armour was implemented and the engines did not stall on approach.

[83] In mid-March, Andre Berthiaume (Mr. Collins’ predecessor), Mr. Collins, and Bruce Paterson, a naval architect with BC Ferries, participated in sea trials of the vessel.

[84] Mr. Collins, Mr. Berthiaume, and Mr. Paterson discussed what should be done following that visit to the vessel. They all had concerns about using the fast idle technique which caused soot and exhaust to be expelled from the funnels at an unacceptably high level. They also tried using the engine emergency controls to override the faulty bridge controls, but found that was not optimal because if used long-term, it could damage machinery.

[85] DDA’s position was that the only way to correct the problem was to modify the propellers. This was expressed in a letter to Mr. Berthiaume in February 2004.

[86] Mr. Collins observed during the trials done on March 16, 2004, that when the ferry was pushing into the dock, the engines were unable to reach full power. He said that it confirmed what he had read in the LamaLo report “that the demand from the propeller was exceeding the available engine power at certain RPM”. He formed the opinion that the propellers were “heavily designed or aggressively designed for the ship.”

[87] Mr. Berthiaume testified that adjusting the propeller was the obvious thing to look at after taking the “easiest approach” of adjusting the controls and failing to solve the problem.

[88] On March 25, 2004, the North Island Princess stalled again while coming into dock. On March 30, 2004, Mr. Collins instructed Mr. Paterson to haul DDA and Mr. Armour into one room, and “hammer them”, on the best approach to resolve the problem. Mr. Paterson responded:

I don’t think there is an opportunity for common ground between Armour and DDA – Armour continues to point to the control system, which in my opinion is a CYA move.

[89] BC Ferries made the decision to pull the vessel from service and to crop the propellers to reduce the draw on the engine. Mr. Collins described the decision this way:

... I’d arrived at the conclusion that the propellers were not properly designed for the ship. Other people -- not everybody shared my opinion, but I personally held that view. When we had these next stalls we clearly had a very serious safety situation on our hands. There was -- the crew was refusing to sail the ship and it would have been irresponsible of us to keep her in service, so we relieved her with the Bowen Queen and said, bring her down.

(Trial Transcript - Day 10, p. 67, lines 1-10)

[90] Mr. Collins testified that he spoke with Mr. Berthiaume, Mr. Paterson, and Mr. Trant, the BC Ferries’ project manager who were all satisfied that the propeller should be modified.

[91] After the diameter of the propeller blades was reduced, the North Island Princess was put back into service and there were no further stalls. Not surprisingly, this confirmed Mr. Collins’ view that the propeller had been the problem all along.

[92] Mr. Collins formed the opinion that PDS was responsible for the problem with the size of the propeller. Although he understood that Mr. Armour had not designed the propeller, Mr. Collins held the view that, as a marine architect involved in the design, Mr. Armour was ultimately responsible for the integration of the propeller and the engines. When they failed to match, resulting in stalling of the vessel, Mr. Collins laid the blame at the feet of PDS. When asked at trial what made him think that Mr. Armour was responsible for the design of the propeller, Mr. Collins said:

Well, sir, I've been involved in perhaps 300 propulsion system commissions and I can tell you in every single one there is a hydrodynamicist or a naval architect somewhere. That person is integral to the process. When I see Mr. Armour, and I see Polar Design, I see a manufacturer, it is standard procedure in the marine business that that naval architect would have an integral role in the matching of the propeller to the engine. The physical matching is one part. I'm aware Polar Design -- when they've described matching they've described it as the physical matching of the components before. I'm talking about propeller demand curve and the engine power curve. And in every one of these systems in my experience, the naval architect is vitally concerned with that and I believe it to be the case here.

(Trial Transcript - Day 11 - pp. 43-44, lines. 43-13)

[93] Consistent with Mr. Collins’ understanding, Mr. Armour had reviewed DDA’s design for the propeller in mid-2003, and had formed the opinion that the propeller’s design complied with the constraints he had set out in his specifications.

[94] Based on the above, I am of the view that Mr. Collins had an honest belief that PDS was responsible for the design problem with the propeller, even though the experts retained by BC Ferries at the time agreed with Mr. Armour that DDA’s control system was the root of the problem.

[95] The next question to address is whether Mr. Collins reasonably could have believed in relation to the North Island Princess that Mr. Armour’s advice had cost BC Ferries significant sums of money.

[96] Mr. Collins was of the view that BC Ferries had incurred considerable costs in correcting the problems on the North Island Princess. These costs included pulling the vessel out of service and replacing it with another larger vessel which was more expensive to operate on the run during the investigation and repairs as well as the costs of actually effecting those repairs to the propeller. On Mr. Collins’ evidence, the North Island Princess losses totalled about $150,000.

[97] Mr. Collins was not the only one who held this view. Mr. Trant wrote on the project amendment form:

The new engines have been stalling on occasion causing the vessel to contact the berth heavily. One time causing injuries to a passenger and a crew member. An additional $75,000 is required to pull the vessel out of service and reduce the diameter of the propellers. The North Island Princess will be taken out of service on March 29th, 2004, in order to facilitate the modification to the propellers. The project manager intends to seek compensation from the naval architect on the basis that there was a design flaw in the specified propulsion system, specifically the propeller design.

(Trial Transcript - Day 10, pp. 74-75, lines 38-4)

I find that Mr. Collins had an honest belief that costs had been increased by BC Ferries as a result of PDS’ advice on the North Island Princess.

[98] Next I must consider whether Mr. Collins was acting recklessly and without regard for the truth when he asserted in the Email that PDS had refused to compensate BC Ferries for these extra costs. At a meeting with Mr. Armour on April 26, 2004 to discuss another vessel, Mr. Collins raised the experience on the North Island Princess with a view to ensuring that similar problems would not be encountered. Towards the end of the meeting Mr. Collins spoke to Mr. Armour, telling him that BC Ferries’ view was that the stalling had been the result of improper propeller design. Mr. Collins testified that he also told Mr. Armour that BC Ferries had incurred considerable costs correcting the propeller mismatch, and did not think BC Ferries should be responsible for the costs. According to Mr. Collins, Mr. Armour’s response was to grow indignant and to insist that there was no problem with the design of the propeller.

[99] Mr. Armour agreed that when Mr. Collins told him at the end of the meeting that the propeller was overloaded, he made it clear to Mr. Collins that he disagreed and told Mr. Collins in essence that he did not know what he was talking about. However, Mr. Armour did not agree that Mr. Collins made a demand for compensation.

[100] Mr. Collins interpreted the conversation with Mr. Armour as an inappropriate response to a customer with a concern. He said:

What concerned me even more, I think, was the underlying refusal to accept any responsibility. Refusal to even discuss whether or not there was some responsibility even there for Polar Design. There was just no discussion. And I have reached the conclusion at that point that this wasn’t the sort of supplier that I would suggest BC Ferries do business with.

(Trial Transcript - Day 10, p. 74, lines 2-10)

[101] While I do not accept that a demand for payment was made formally, I do find that Mr. Collins had an honest belief that PDS was refusing to accept responsibility, financial or otherwise, for what he saw as the propeller problem.
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[Low Light Mike]

More highlights re from the judgement, re ship issues:
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(ii) The Spirit of British Columbia
[102] PDS was subsequently retained in the spring of 2005 to design changes to the deck of the Spirit of British Columbia, in particular, to stiffen the deck to support a lifeboat crane called a davit, which was part of an upgrading of the lifesaving equipment.

[103] Once the work was underway, the shipyard discovered that the drawings that PDS had been working from were out of date in the sense that some modifications had been made to the deck which had not been reflected in the drawings provided to PDS to do its design work.

[104] In response, Mr. Armour prepared a modified design using two brackets. That modified design was provided to BC Ferries and the shipyard.

[105] Subsequently, the project manager informed Mr. Armour that there was an interference problem with the brackets; he asked Mr. Armour if the shipyard could change the orientation of the support to use a transverse web. Mr. Armour told him that he did not have any objection to that.

[106] The shipyard failed to put in either the brackets or the transverse web support. When Transport Canada tested the equipment, there was too much flex in the deck and Transport Canada would not approve the vessel.

[107] Mr. Collins was briefed on this problem and informed that, while the shipyard had modified the original design prepared by PDS, the shipyard had checked it with PDS before doing the modification and Mr. Armour had approved it. Mr. Collins understood that the shipyard followed the modified design and yet the ship had failed the flex test for the deck.

[108] It was Mr. Collins’ understanding that when Mr. Armour was confronted about the problem, he said that he had told the shipyard that he was “okay with” the modified design but denied actually approving it.

[109] Mr. Collins testified that he took this as further evidence that PDS was refusing to accept responsibility for work that they were doing for BC Ferries. Another BC Ferries employee, Mark Nichol, also expressed concern to Mr. Collins that a change of a relatively significant design item had occurred without BC Ferries’ knowledge.

[110] Mr. Armour acknowledged in cross-examination that he had not informed BC Ferries that the shipyard had failed to put in the modified support he had okayed or any additional support at all.

[111] In the circumstances, I am of the view that Mr. Collins could have formed the view that PDS had approved a design that failed to secure Transport Canada approval even though fault actually lay with the shipyard.

[112] In relation to the Spirit of British Columbia, BC Ferries did not demand compensation and PDS was paid in full for its work on this project
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[Low Light Mike]

more ship info from the Judgement:
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(i) The John Atlantic Burr
[114] I note at the outset that, because of MDA, BC Ferries acquired the ferry John Atlantic Burr for about $10 million less than it would have paid for a new one. Despite that, Mr. Collins was unhappy with MDA’s work on the John Atlantic Burr project. His perception was that MDA had performed poorly in two respects: first, by not identifying the significant cost to remove the ferry from the lake in Utah, and second, by failing to obtain a firm price quote from the contractor chosen by BC Ferries to transport the John Atlantic Burr to the coast. I find, after listening to what actually happened, that Mr. Collins’ assessment of MDA’s performance was not justified. But the question I must address is not whether Mr. Collins was right, but whether, at the time he wrote the Email, he honestly held his belief that MDA had not performed well.

[115] In relation to the “missed haul out costs”, Mr. Smiley had in fact told BC Ferries in July 2005 that transportation costs to move the vessel to British Columbia could be as high as $1.2 million. He advised the company of that potential cost before BC Ferries made the decision to purchase the John Atlantic Burr. However, that quote did not make its way into the preliminary budget prepared by BC Ferries, and Mr. Collins was not aware of MDA’s estimate before he sent the Email.

[116] Mr. Smiley also advised BC Ferries early on that the ship should not be taken out of the water until a firm price had been obtained from Emmert, the transport contractor. Further, he suggested making the purchase of the vessel conditional on the transportation costs not exceeding a particular value. BC Ferries failed to follow that advice.

[117] Mr. Smiley acknowledged that he did not specifically include an amount for removing the vessel from the lake itself because he thought it would cost about $10,000, which he described as a “nothing cost” given the scale of the transportation expenses that he had pegged at $1.2 million.

[118] On August 30, 2005, Mr. Paterson told Mr. Smiley that he was putting together some budget numbers and asked Mr. Smiley if Emmert’s estimate for transporting the John Atlantic Burr of $450,000 was still correct. Mr. Smiley told him it was the number he had received from Emmert, subject to a route survey being done. Mr. Smiley knew this was the road haulage estimate. He was not expecting Emmert to lift the vessel out of Lake Powell at that point, and did not expect that part of moving the ship to be significant in any way.

[119] What Mr. Smiley did not know, when he was providing the initial recommendations to BC Ferries, was that the lake in Utah had dropped to100 feet below its normal level. As a result, getting the vessel out of the lake went from being a “nothing cost” to a significant $280,000 one. Mr. Smiley acknowledged that he was shocked by that cost, as was BC Ferries when Emmert included it in the estimate.

[120] Mr. Smiley agreed that MDA was responsible for transportation of the vessel from Lake Powell to the conversion site in British Columbia including “arranging contracting with experienced heavy lift subcontractor, Emmert International”. Mr. Smiley said that he understood this meant MDA was to obtain a firm price quote from Emmert.

[121] MDA was aware it would be retained on the John Atlantic Burr project by August 31, 2005, although the statement of work was actually issued September 12, 2005.

[122] MDA initially planned to use BECO to do the haul out from Lake Powell, as they had done in 1996 when the vessel was lengthened under MDA’s supervision. It was not until a meeting with BECO and Emmert on September 7, 2005, that Mr. Smiley first became aware that the lake level was “way below normal” such that removal was beyond BECO’s resources.

[123] At that point, Mr. Smiley asked Emmert if they could remove the boat from the water, something which he described as not within their “normal mandate for doing business.”

[124] There was some delay in getting a quote from Emmert and Mr. Smiley continued to press Emmert to get on with providing a firm quotation for the job, including the haul out. He wanted that from them by September 26, 2006 so that BC Ferries would have the cost before they took possession of the vessel on October 2.

[125] Emmert provided the price quote on September 27, 2005. Mr. Smiley went to their Oregon office to meet with them. Emmert presented a letter on that date which became part of the heavy haul agreement. That agreement included the $280,000 cost to remove the vessel from the lake. Mr. Smiley said he “expressed shock” when he read it. He was so taken aback he told them he did not see BC Ferries accepting that number. According to Mr. Smiley, Emmert’s response was: “This is our price and it’s not negotiable.”

[126] Mr. Smiley immediately passed the estimate on to Mr. Paterson of BC Ferries. MDA understood on September 30 that BC Ferries nonetheless agreed to send the mobilization money to get the vessel’s removal and transportation underway.

[127] After the vessel was finally removed from the lake on October 15, 2005, Mr. Smiley returned to Vancouver. On October 19 he met with Mr. Paterson and Mr. Collins at BC Ferries’ offices in an upbeat mood now that the project was underway. However, Mr. Collins turned out not to be interested in Mr. Smiley’s description of how impressive it was seeing the ferry moving up the ramp out of the lake. Instead, Mr. Collins took what Mr. Smiley viewed as an unfriendly, aggressive and angry stance. He told Mr. Smiley that BC Ferries wanted $280,000 of haul out charges back from Emmert and if he did not get it from Emmert, he wanted it from MDA.

[128] Not surprisingly, Mr. Smiley’s reaction was negative. He felt Mr. Collins was talking down to him and reminded Mr. Collins that BC Ferries had a letter offer from Emmert which BC Ferries had accepted, including the $280,000 haul out price. Mr. Smiley told Mr. Collins that he “should read the fine print”. He also told Mr. Collins that MDA did not have that kind of money even if they were inclined to give it to BC Ferries. Mr. Collins believed that this exchange amounted to a refusal by MDA to compensate BC Ferries for this unanticipated expense. I accept that he had an honest belief in this regard.

[129] There followed a number of acrimonious calls between Mr. Collins, Emmert’s principals, and Emmert’s legal counsel. Mr. Collins was offended by the arrogant tone adopted by Emmert’s legal counsel in particular and demanded a break in the costing from Emmert.

[130] By October 31, Mr. Smiley had exhausted his efforts with Emmert. The ferry was almost ready for transport, BECO having cut it up into four hull sections and readied the dollies for the highway transportation to the ocean.

[131] Emmert and BC Ferries continued to negotiate the line items of the contract directly and Mr. Smiley stepped back from those negotiations. In his view, he was not hired to do the legal and negotiating aspects of the contract, but only to serve, in effect, as a “post master” between the two parties.

[132] Emmert and BC Ferries finally signed a heavy haul agreement on November 7, 2005. When Mr. Smiley sought payment of an invoice due to MDA on the John Atlantic Burr project on December 7, Mr. Collins told him that BC Ferries had concerns about MDA’s performance to date. MDA agreed to reduce its invoice by $7,000 because BC Ferries thought it was too high.

[133] On December 17, 2005, BC Ferries relieved MDA of the rest of the transportation work on the John Atlantic Burr project.

[134] On January 3, 2006, Mr. Smiley requested a meeting with BC Ferries to address the concerns they had raised about MDA’s performance on the John Atlantic Burr project. That meeting took place on January 27 and was, by all accounts, including Mr. Collins’, a “decent, amiable meeting.” That meeting focused on the need for MDA to advise BC Ferries if it was unable to comply with a particular deadline and an explanation by Mr. Collins of the significance of the deadlines given the new structure within BC Ferries which had been modified to assign an owner, sponsor, and project manager for each major project.

[135] At the earlier October 17, 2005 meeting, it was Mr. Collins’ evidence that, when he expressed dissatisfaction with the unexpected haul out cost, Mr. Smiley responded by saying “I missed it.” Mr. Smiley denied that he said this.

[136] Whether Mr. Smiley said that he missed it or not, on his own evidence, he agreed that he did not identify specific costs to remove the vessel from the water. That was an entirely reasonable position to take given that he expected the cost to be $10,000 and did not know that the lake level had dropped by 100 feet. However, Mr. Collins’ interpretation of the events and his belief that MDA had somehow failed BC Ferries by not identifying that there would be a cost for haul out, and potentially a significant one, was a belief honestly held in the circumstances and not one that was reckless, even if it was unreasonable.

[137] Similarly, MDA did have a role to play in obtaining a firm price quotation from Emmert, and was unable to deliver that. I find that this was due to Emmert’s hardball approach and the fact that it was bargaining from a position of strength with no competitors, knowing that BC Ferries needed to get the vessel out of the water and up to Vancouver so that it could be refitted and put into service in the Spring of 2006. Nonetheless, Mr. Collins’ perception that MDA had pulled back and left BC Ferries to pin Emmert down on a price is an accurate one. There is not much more in my view that MDA could have done to assist in the circumstances, but I find Mr. Collins’ belief that MDA had not “delivered a firm price quote from Emmert” to be one he honestly held.
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