Court sides with Trisura in $475K construction bond case

Trisura has successfully defended a $475,000-plus claim against it after a B.C. court found a construction subcontractor couldn’t prove it had a formal contract with the principal contractor named in Trisura’s labour and materials (L&M) payment bond.

“I…do not accept that I can infer a subcontract from the mere fact that the plaintiff [Wolverine Construction Inc.] did work on the Chetwynd Project and incurred costs and expenses in relation to the project,” the B.C. Supreme Court ruled in a decision released Wednesday.

“The evidence is overwhelming, and I find as a fact, that [Wolverine] took over the entire project with the intent of procuring an assignment of the head contract rather than as a subcontractor to Frontline [the principal contractor named in Trisura’s bond]. The fact that the assignment did not come to pass does not alter the basis upon which [Wolverine] became and was involved in the project.

“[Wolverine] did not contract with Frontline for the supply of goods and materials to the project on terms that rendered Frontline liable to [Wolverine] for the costs of the goods and materials supplied [i.e. costs that would have been paid by Trisura’s L&M bond].”

In Wolverine Construction Inc. v Trisura Guarantee Insurance Company, landowner Peace River Regional District [PRRD] entered into a contract with Frontline Civil Holdings Ltd. for the construction of a landfill closure system, a landfill site management system, surface water management system and Crest Road construction at the Chetwynd Landfill [referred to in the decision as the “Chetwynd project”].

Trisura issued a labour and materials payment bond to Frontline for the Chetwynd project amounting to $714,386. Frontline was named as the ‘principal’ on the L&M Bond. PRRD was named as ‘oblige.’ The bond made Trisura and Frontline jointly and severally liable for payments to ‘claimants’ for up to the maximum amount listed in L&M Bond.

Frontline commenced work on the Chetwynd project, but by June 2019 it was having financial difficulties. It entered into discussions with [Wolverine] for assistance in finishing the project. Wolverine undertook certain work and paid various expenses associated with the project from July 2019 onwards.

In September 2019, Frontline was assigned into bankruptcy. In October 2019, the PRRD issued a notice of default to Frontline and to its trustee in bankruptcy. Shortly thereafter, PRRD instructed that all work on the project was to cease.

In January 2020, Wolverine gave written notice to Trisura and PRRD that Frontline had failed to pay it $476,048 for labour and materials supplied to the Chetwynd project. It claimed this amount plus interest against Trisura’s L&M Bond to Frontline.

A ‘claimant’ under Trisura’s bond is someone “who has not been paid as provided for under the terms of its contract with the principal.” Trisura asked Wolverine for documentation proving it had a contract with the bond’s principal, Frontline.

Trisura denied the claim when Wolverine couldn’t produce a formal contract.

The court sided with Trisura, noting that although Wolverine produced documentary evidence it was negotiating with PRRD and Frontline to have the head contract assigned to it, it could not provide first-hand or documentary evidence that a contract with Frontline — including terms and conditions for the costs of materials to be purchased — actually existed.

For example, the court emphasized a section in a June 2020 letter from Wolverine’s solicitors to Trisura, in which the lawyers stated: “It appears that there is no serious dispute that Wolverine has done substantial work at the project, which has advanced the project and from which PRRD has benefited. This work may have been pursuant to an agreement with Frontline or it may not have been. Regardless, Wolverine is entitled to payment…”

Regarding this letter, the court pointed to the words “may have been pursuant to an agreement with Frontline or it may not have been.”

The court noted the letter mentioned, “the lack of evidence of a subcontract between the plaintiff [Wolverine] and Frontline was acknowledged by the plaintiff’s solicitors,” in addition to other evidence of Wolverine’s ambiguity on this point.

 

Feature image courtesy of iStock.com/narvikk