It would be an interesting lawsuit, even if the stakes weren’t so high.
But with considerably more than $57 million of Muskrat Falls cash on the table, it’s going to be a wild one. Oh, and another thing: it might not happen at all.
It’s about cable conductors, the wires used in power lines being strung across the island, and contract law.
It all has to do with a Nalcor subsidiary, the Labrador-Island Link Limited Partnership (LILP), and one of its suppliers, General Cable Company Ltd.
General Cable, a cable supplier for 170 years with manufacturing operations in 26 countries based in Highland Heights, Kentucky, was the supplier for conductors — the electricity-carrying cables — that were to be used for the power line stretching from the Northern Peninsula to the Soldier’s Pond power station outside St. John’s. LILP says in its statement of claim that it knew there was a problem with the type of wire that General Cable recommended and later supplied. LILP had required the supplier to build a prototype of the cable and “subject it to a series of tests,” according to the lawsuit.
One of those was known as a “sheave” test. It involves pulling the sample of cable over a pulley or series of pulleys — similar to the pulley system that LILP was going to use to install the cable — and then inspecting the cable to see if any issues arise.
One issue did appear, according to LILP: strands of wire popped out of the power line, deforming the cable. This was a problem.
It’s about cable conductors, the wires used in power lines being strung across the island, and contract law.
As LILP wrote in their suit, “This unconformity is in breach of the specifications and can potentially jeopardize the performance of the conductor and the operability of the transmission system.”
LILP believed the problem, once identified, had been fixed. It pre-inspected the cable as it was delivered, and found no anomalies.
It had its contractors start stringing the line, and the work went on for several months.
In March 2016, an inspection discovered that, after 170 kilometres of the cable had been installed, strands were popping out of the General Cable, with the problem occurring in “significant intermittent portions” of the cable. (One point occurs to me: if you’d already found an issue with a cable, wouldn’t you inspect for that particular issue again sometime before you had 170 kilometres of it stretched in the air?)
“General Cable failed to remediate their defective supply or pay the costs associated with rectifying the unacceptable supply of 110 Strand Conductor. As such, (LILP) bore all costs associated with removing and replacing the product and modifying the remainder of the un-installed product to make it fit for purpose,” the LILP lawsuit claims.
Modifying the cable, along with testing and purchasing new cable from another source and replacing the damaged cable, cost LILP $57,552,556 — it wants that money back, along with interest, general damages, special damages and legal costs.
It all seems like a simple enough corporate lawsuit: companies fight over a product, and the court decides. At this point, none of the competing claims have been tested in court.
But this gets even more interesting. General Cable says the purchase agreement between it and LILP had specific conditions for dealing with disputes between supplier and the project owner. In particular, General Cable says the dispute mechanism stipulates that “the parties must comply with this Article 34 before commencing any further action, legal or otherwise, with respect to a dispute under this agreement.”
There are a whole bunch of steps in Article 34: written notice of a dispute, a meeting of senior project managers to try and resolve the problem, then, if that was unsuccessful, a meeting of “project sponsors,” and if no solution was found there, a meeting between “vice presidents for the parties” to try and resolve the dispute.
General Cable says that process didn’t take place; an affidavit by a General Cable official in Kentucky says LILP didn’t even request that the process start.
For their part, the company says that means the entire LILP lawsuit should be thrown out of court: “This action has been brought by (LILP) in complete contravention and disregard for its contractual undertaking and therefore constitutes an abuse of process,” it says, adding it “should be set aside or struck out and this action should be dismissed” with LILP paying General Cable’s costs.
A hearing on that application is set for Oct. 19.
Then, LILP’s lawyers and General Cable’s lawyer will argue their respective cases.
Barely more than step one in a lengthy and expensive process — with plenty at stake.
Other columns by this author
Russell Wangersky: It is (over) written
Russell Wangersky: The dangers of drawing your net too tight
Russell Wangersky’s column appears in 39 SaltWire newspapers and websites in Atlantic Canada. He can be reached at [email protected] — Twitter: @wangersky.
