Executive Summary: Key Legal and Evidentiary Issues

• The application for partial summary judgment by Nahanni Construction Ltd. (NCL) was dismissed as premature due to incomplete pleadings and failure to produce a Statement as to Documents.

• The court determined that the issues raised by the claim and counterclaim were so intertwined that they must be decided together at trial to avoid inconsistent findings.

• NCL’s failure to comply with procedural rules, particularly in not producing a Statement as to Documents, prejudiced the defendants’ ability to respond and delayed the litigation.

• Solicitor and client costs were denied; instead, the court awarded enhanced party and party costs to the defendants, calculated as a multiple of three times the tariff, payable immediately.

• The court recognized that summary judgment applications are encouraged but must be reasonable and not used to delay proceedings.

• NCL was ordered to produce and serve its Statement as to Documents within 60 days of the judgment.

Background and facts of the case

Nahanni Construction Ltd. (“NCL”) commenced an action against Bonito Capital Corp (“BCC”) and Lupin Mines Incorporated (“LMI”) for alleged breach of a settlement agreement. The dispute arose from a contract for the closure and reclamation of the Lupin Mine, an underground gold mine in Nunavut. In 2019, BCC awarded NCL the role of head contractor for the project. After a dispute, NCL left the project site in September 2020, leaving behind construction equipment and materials (the “NCL Materials”). BCC terminated the Prime Contract, and the parties entered into a settlement agreement in December 2020.

The settlement agreement included the following key terms:

• NCL permitted BCC to use the NCL Materials until the closure of the Tibbit to Contwoyto winter road in 2022 without additional charge (Clause 5).

• NCL was to provide a mechanic at the start of the 2021 construction season to inventory and report on the state of repair of the NCL Materials, with the report to be agreed upon by both parties before BCC took control (Clause 6).

• BCC was to operate and maintain the NCL Materials according to industry standards (Clause 9).

• BCC agreed to return the NCL Materials to NCL’s Yellowknife yard by the closure of the winter road in 2022, in substantially the same condition as described in the mechanic’s report, except for reasonable wear and tear (Clause 13).

• If BCC was delayed in returning the materials due to certain causes beyond its control, including adverse weather or unavoidable casualties, the time for return was extended to the closure of the winter road in 2023 (Clause 14).

• NCL was not entitled to payment for delays unless the delay resulted from BCC’s actions; if so, BCC was to compensate NCL for rental of the NCL Materials not returned, up to a maximum of $1.5 million (Clause 15).

A mechanic hired by NCL and an agent for the defendants inspected the NCL Materials at the start of the 2021 construction season, and a report was approved by BCC on May 4, 2021. BCC used some of the NCL Materials from April to October 2021. The winter road closed on March 31, 2022, but BCC had not returned the NCL Materials to NCL’s yard. On April 28, 2022, NCL invoiced BCC for $1.5 million plus GST ($1,575,000 total). On May 9, 2022, BCC’s counsel gave formal notice of the delay, citing the age and condition of the equipment and difficulties obtaining parts during the COVID-19 pandemic as reasons beyond BCC’s control. BCC maintained that NCL was not entitled to compensation under the settlement agreement. As of the date of the decision, BCC had not returned the NCL Materials.

NCL’s Statement of Claim, filed September 9, 2023, alleged breach of the settlement agreement for failure to return the NCL Materials by the closure of the winter road in 2022 and sought $1,575,000 for rental until 2023, $1,575,000 annually for alleged wrongful retention, and at least $5,000,000 for property damage or diminution in value. The defendants’ Statement of Defence and Counterclaim, filed March 14, 2024, asserted that delays were not due to their actions but to the poor condition of the NCL Materials and logistical challenges, and counterclaimed for losses allegedly caused by NCL’s failure to ensure the materials were operational.

Summary judgment application and procedural issues

On November 7, 2024, NCL served a Notice of Motion for Partial Summary Judgment, seeking $1,575,000 for rental from 2022 to 2023 and $1,575,000 annually for wrongful retention. The application did not address property damage claims. At the time of the application, NCL had not filed a Statement of Defence to the Counterclaim or a Statement as to Documents. The court found that the application was premature because it was filed before the close of pleadings and before NCL had fulfilled its documentary disclosure obligations. The court noted that the defendants had identified specific documents and discovery areas they wished to pursue, and that NCL’s delay in closing pleadings and producing documents prejudiced the defendants’ ability to respond.

The court also found that the issues raised by the claim and counterclaim were significantly intertwined, particularly regarding the condition of the NCL Materials and the parties’ obligations under the settlement agreement. The court concluded that both the claim and counterclaim must be determined at trial to avoid inconsistent findings of fact.

Costs decision

After dismissing the summary judgment application, the court invited submissions on costs. The defendants sought solicitor and client costs under Rule 180, arguing that NCL’s application was unreasonable and caused unnecessary expense. The court found that while NCL’s conduct delayed the litigation, there was no evidence that the application was brought in bad faith or primarily to delay the proceedings. The court declined to award solicitor and client costs, instead awarding enhanced party and party costs, calculated as three times the applicable tariff, payable immediately. The court emphasized that summary judgment applications are encouraged but must be reasonable and not used to delay proceedings.

Outcome

The court dismissed NCL’s application for partial summary judgment and ordered NCL to produce and serve its Statement as to Documents within 60 days of the judgment. The defendants, Bonito Capital Corp and Lupin Mines Incorporated, were awarded enhanced party and party costs on a multiplier of three times the tariff, payable immediately. No exact monetary amount for costs was specified beyond the tariff multiplier. The main claims remain to be determined at trial.